The Cost Of Investment And Investments Essay

900 Words Dec 15th, 2016 4 Pages
In Keynes’ view, excessive inflation and deflation capable of disrupting the stability of the economy could be ascribed to the gap between savings and investments. As individuals make decisions on savings and investments, there is no guarantee that these decisions complement each other. Rate of interest defines the standard for the profitability of investments! Therefore, control of monetary system has become control of credit by means of the rate of interest and it’s necessary for the government to control and guide investments directly.2 No practical reduction in rate of interest will be enough to stimulate investments.
Conventionally, profit has been considered as reward expected by capitalists for their activity and such activity, as a reward for their willingness to invest rather than consume their savings. Profit also rewarded them for taking risks or for their social importance in developing ambiguous methods of production, which while leading to greater productivity, imply waiting periods for long-term investments. Profits and interests shouldn’t be viewed as rewards for saving and investing money but as rewards for prevailing over the desire not to invest and opposing liquidity preference. In other words, profits and interests are there for the willingness on the part of the capitalist to remain a capitalist.2
Keynes believed there hasn’t been a challenge to solve the problem of unemployment.2 Flexible wage policy can be made by flexible money policy where a rise…

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