Investment Function
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Investment Function Determinants I = c + d(Y)
• Investment is the function of Income and interest = I = f (Y , r) • I = c + d (Y) • c = autonomous component • d = induced component • I is also the function of rate of interest • Change in I/ change in r =Marginal responsiveness of Investment to interest rate.
i1 io
i=(y1) i=(y0)
o
r0
y2
r1
• Investment is the function of Income and interest = I = f (Y , r) • I = c + d (Y) • c = autonomous component • d = induced component • I is also the function of rate of interest • Change in I/ change in r =Marginal responsiveness of Investment to interest rate.
i1 io
i=(y1) i=(y0)
o
r0
y2
r1
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