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Unit 6: Investment
Figure 6.4 Notes
If rate of interest rises, then volume of investment goes down and if the rate of interest goes
down, the volume of investment rises. When investment goes down, the MEC goes up and when
investment goes up, MEC goes down. Thus both investment and MEC can be said to be inversely
related (Figure 6.5).
Figure 6.5
The investment curve, according to modern economist, does not have the same elasticity
throughout. At a very low rate of interest, investment curve may be vertical and beyond a
crucial rate of interest, the curve may be elastic (Figure 6.6).
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