Investment as a Factor of Economic Growth

Abstract

Investment is an important factor of economic growth. It defines the process of expanded reprocessing. Accumulation of social capital is possible due to investments. Investments contribute to additional revenue, which is determined by the state of general economic activity. Fluctuations in output affect the dynamics of investment over the business cycles. Theory and dynamics of investments are based on the principle of a “multiplier”. The activity of investment resources as an economic factor is determined by its multiplying property. Its essence is that investment resources increase the equilibrium level of national output by an amount greater than the investment resources themselves. Modern economic growth theory was formed based on the ideas of optimality of the market system considered as a perfect self-regulating mechanism. Significant contribution to the development of economic growth theory was introduced by R. Solow. He developed two models: the model of factor analysis of economic growth sources and the model which reveals the relationship of savings, capital accumulation, investment and economic growth. Research investments as a factor of economic growth resulted in two ways out on the economic growth in Russia formulated in the article.

DOI: 10.5901/mjss.2015.v6n3s7p259