How To Stimulate Private Investment

To stimulate private investment, a government needs to create a conducive environment. This can be done by establishing a stable price environment. This does not necessarily mean price rigidity, but relative price stability. In addition, a rising price policy is believed to stimulate investment. Keynes also associated pump-priming programmes and compensatory spending with multiplier theory. This theory describes a multiplier effect, a process in which the government tries to increase demand through price rises and decrease prices.

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