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BPEA Article

Investment in the 1970s: Theory, Performance, and Prediction


ONE of the most widely perceived characteristics of economic recovery
since early 1975 has been the relatively slow growth of business fixed
investment. At the end of 1978, for example, real GNP was 13.8 percent
above the value attained at the cyclical peak five years earlier. By contrast,
the performance of real nonresidential fixed investment has been
poor. Its previous peak value, reached in the first quarter of 1974, was
only surpassed in the second quarter of 1978. Even by the end of 1978,
it was only 8.1 percent above the earlier peak.



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