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sounds like you need a new wiring harness. this is a very common problem on 240's - From Dave Barton's Wiring Harness Page, which is currently down...
A Little History
"The factory original Volvo harnesses installed during the 1980 through 1988 model years started to disintegrate after a few years of exposure to engine heat. The vinyl protective sheathing would get hard and brittle and begin to crack... this is not the major offense though and a hardened outer sheath will not directly affect performance... but it is a symptom you'll recognize in an old harness. The bad part is that the insulation on the wires began to get soft and would crumble away, eventually leaving exposed wires to short out and cause all kinds of problems with electronic systems. This problem was accelerated in turbocharged cars due to the much higher heat conditions in the engine bay. For whatever reason, this problem did not seem to plague pre-1980 Volvos, nor the 1988 and later cars, which all seemed to have good wire insulation. It is my understanding that Volvo was able to correct the problem by the 1988 model year."
Recognizing the Problem
"Typical deterioration of an original Volvo engine harness in a car manufactured between 1980 and 1987 would usually become obvious when some of the visible wires on top of the engine lost their insulation. This loss of insulation is most likely caused by years of exposure to engine heat. Turbocharged cars often have accelerated harness deterioration. On 240's you would probably first see evidence of deterioration on the wires going to a gray rectangular 8-pin connector near the firewall or on wires going to or near the alternator. On 740's you might see damage at these gray 8-pin connectors too (they're near the fenders) as well as the ground wires or fuel injector wires near the top of the intake manifold"
"If your '80 to '87 Volvo still has the original harness and you don't yet see any such obvious damage yet, please don't be too confident and think you got off lucky. I have inspected thousands of 1980 through '87 Volvo harnesses in wrecking yards and elsewhere, and unless the car had very few miles, the original harnesses pretty much went bad 100% of the time. This often happens in places where it is not so obvious too, such as deep inside the protective vinyl covers of the harness. If you have one of these Volvos, this could very well be the cause of intermittent failures. These harnesses connect to such components as the engine sensors, alternator, starter motor, fuel injectors, throttle position switch, idle control valve, mass air sensor, fuel pump relay, oxygen sensor, ground points, control pressure regulator and cold start injector."
According to dave, it costs 300-400$ depending on where you buy it, volvo retail for your car is $406. Part# 9139228.
hope that helps
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