This paper presents an investment theory for the firm and the indu stry under rational expectations that encompasses: (1) classical capital theory; (2) a solid microeconomic basis for Keynes's investment theory; and (3) traditi onal neoclassical investment theory for the firm. These three types...

The authors analyze the welfare consequences of deficit finance in a gene ral equilibrium model fit to the U.S. economy. Current spending may b e financed with current and/or future distortionary taxes. The econom y is open to international capital flows. The welfare costs of financ ing marginal...