ABSTRACT
In order to place the factors determining the economic development of the capitalist economy in their proper perspective it is necessary to restate briefly our basic theory of investment. According to this theory, investment in fixed capital per unit of time is determined (with a time lag) by three factors: (1) by the current ‘internal’ gross savings of firms; (2) by the rate of increase in profits; and (3) by the rate of increase in the volume of capital equipment. The first two influences are positive and the third is negative. Investment in inventories is taken to be determined by the rate of increase in output.
