FACTORS WHICH INFLUENCE INVESTMENT FUNCTION

by • 02/07/2011 • B.COM PART 1 EconomicsComments (0)777

  • Rate Of Interest:

Rate of interest is the cost of production. Higher interest rate reduces profit margin, therefore businessmen do not take interest in investment activities and whereas lower interest rate increases profit margins hence lot of investment is undertaken by the private sector.

  • Marginal Efficiency Of Capital Or Expected Rate Of Profit:

The investment is largely depends on marginal efficiency of capital. If the business expectations are good or if the marginal efficiency of capital is high more investment will be made.

  • Technical Progress:

Technological progress also affects current level of investment. For example, a new invention may render the capital stock of a firm obsolete and adversely affect its ability to compete. In this case further investment will be made.

  • Political Stability And Security:

Investment is very sensitive. It requires stable political Govt. peace and security. The greater these elements more will be investment and vice versa.

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