Savings equals investment in equilibrium ignoring government

Last updated: 5/7/2023

Savings equals investment in equilibrium ignoring government or foreign sector In equilibrium aggregate demand total planned spending must equal output and income Investment and savings are primarily functions of the rate of interest Demand particularly intended investment drives supply Capitalist economies will normally fail to reach full employment due to insufficient aggregate demand Interest rates fall when money saved exceeds the demand for those funds for investment until savings equals investment 1 neo classical 2 post Keynesian 3 Both