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Production and Investment

  • Lester D. Taylor
Chapter

Abstract

The focus in this chapter is on the role of capital in production and the relationship between demand, short-run marginal cost, and investment. The point of departure is the simple truism, noted in Chap. 1, that current demand has to be served from current capacity, which is fixed. Current production decisions, accordingly, involve the choice of how much of current capacity is to be utilized. This depends upon expectations of current demands in relation to current short-run avoidable costs of production. Current investment decisions, in contrast, depend upon demands expected in the future in relation to the expected short-run avoidable costs of operating the capacity, which is expected to be available for serving those demands.

Keywords

Investment Decision Planning Horizon Current Period Natural Rate Government Bond 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

References

  1. Davidson, P. (1978), Money and the Real World (second edition), John Wiley and Sons, New York.Google Scholar
  2. Hall, R.J. and Hitch, C.J. (1939), “Price Theory and Business Behavior,” Oxford Economic Papers, May 1939.Google Scholar
  3. Keynes, J.M. (1936), The General Theory of Employment, Interest, and Money, Macmillan, London.Google Scholar
  4. Keynes, J.M. (1937b), “Alternative Theories of the Rate of Interest,” Economic Journal, Vol. 47, pp. 241–52.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC 2010

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of ArizonaTucsonUSA

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