sir can u please explin thru a practical example , how induced investment is a negative function of ROI ?
Induced investment is inversely related to rate of interest. This is because interest rate is the cost of investment. This can be understood in two ways. If an individual invests his own money then he must forego the rate of interest that he could have earned from other income earning assets and securities. Similarly, if money is borrowed for investment purpose, interest would have to be paid on the borrowed amount. Thus, higher the interest rate, lower will be the investment and vice-versa.