Keynes considered investment to be the most important and most volatile determinant of the level of economic activity because of the essential role of expectations in influencing the expenditure decisions of private corporations. He expressed the relationship between expectations of future income from investment and its current financing in the form of a concept he called the marginal efficiency of capital which covered both the supply price and the demand price of capital in relation to financial conditions.
Keynes’s criticism of traditional theory argued not only that a priori saving was not a constraint on investment expenditures, but that savings did not provide the financing for investment expenditures. It was thus a critique of the “crowding out” hypothesis. The finance motive was advance to demonstrate that savings had no impact on interest rates, which were determined by liquidity preference, or on the ability of entrepreneurs to borrow, which was determined by the willingness of banks to expand their balance sheet by accepting business liabilities against the concession of new deposits.