How is equality of saving and investment in economy ensured

Assignment Help Microeconomics
Reference no: EM13897637

"From the time of Say and Ricardo the classical economists have taught us that the supply creates its own demand ... (and) that an individual act of abstaining from consumption necessarily leads to ... the commodities thus released ... to be invested ... so that an act of individual saving inevitably leads to a parallel act of investment ... Those who think this way are deceived.

They are fallaciously supposing that there is a nexus which unites decisions to abstain from consumption with decisions to provide for future consumption, whereas the motives which determine the latter are not linked with the motives which determine the former." (Keynes, 1936, pp. 18-21). Explain this statement.

If investment and saving depend on different determinants, what are these determinants and how is the equality of saving and investment in the economy ensured? Or does it also become an identity? If it is not an identity, outline the possible scenario of the likely adjustment pattern in the economy following an exogenous decrease in consumption.

Reference no: EM13897637

Questions Cloud

Are leaders born or can they be made why or why not : Create a 3- to 4-slide Microsoft PowerPoint presentation with detailed speaker notes in which you address the following question - Are leaders born or can they be made? Why or why not
How will political turmoil affect political risk in egypt : Web Question: How will the political turmoil in a number of Middle East countries in early 2011, such as Egypt, affect political risk? Try to use Web resources on ratings and spreads to come up with a quantitative answer.
Is effect on interest rates less or greater : Suppose the central bank pegs the price level by using money supply changes through open market operations. Present the IS-LM analysis incorporating this money supply rule and show the implications for the money supply, aggregate demand and output..
How licensing royalties fees affect value of foreign project : How do licensing agreements, royalties, and overhead allocation fees affect the value of a foreign project? Why does an adjusted net present value analysis treat the present value of financial side effects as a separate item?
How is equality of saving and investment in economy ensured : They are fallaciously supposing that there is a nexus which unites decisions to abstain from consumption with decisions to provide for future consumption, whereas the motives which determine the latter are not linked with the motives which determi..
What is interest subsidy and how do you calculate its value : What is an interest tax shield? How do you calculate its value? What is an interest subsidy? How do you calculate its value? What are growth options? Provide an example of one in an international context.
What processes will take the economy to these levels : Suppose that business pessimism reduces investment such that aggregate demand becomes less than full employment income at all non-negative rates of interest.-What processes will take the economy to these levels?
What is the difference between ebit and noplat : What is the difference between EBIT and NOPLAT? Why is it important to understand and manage net working capital? What does CAPX mean, and why is it a firm's engine of growth?

Reviews

Write a Review

 

Microeconomics Questions & Answers

  Investments in career development do not give organization

for the statements below you are to write two answers. one answer should agree with the statement the other should

  What was the advantage to sellers

In the chapter we mention how prices can vary in a tourist trap. Which market, St. Louis or Chicago, was more likely to behave like a tourist trap? Explain.

  Explain how you would convince businesses to increase

discuss how you would convince businesses to increase exports and how you would put an ad campaign together directed at

  Does make the firms more risky or less risky

What characteristics of oligopoly make their prices and output levels "sticky"? Does this make the firms more risky or less risky?

  What is the probability that a student takes psychology

The probability that a student takes Economics is 0.70. What is the probability that a student takes Psychology given that the student is taking Economics?

  The aluminum association reports

The Aluminum Association reports

  What is models average estimation error for the three month

If in January 2005 the money supply was $6,415.1 billion, what is your estimate of October, November, and December 2006 money supply?

  Define effect of the buisiness cycle on the multiplier

Effects of wage stickiness and the shape of the aggrate supple curve,effect of expectations on aggragate demand. Phillips Curve, natiral rate of unemployment, expacted inflation , the relationshipe between AS-Ad and the Phillipe Curve.

  Spend on product development and marketing by

Firms decide how much to spend on product development and marketing by

  Question 1use the information on the kumquat market in the

question 1use the information on the kumquat market in the table to answer the following questions.a. what are the

  What should happen to nominal output assume further that

suppose that velocity is constant at 9 but the nominal money supply increases from 1.5 to 1.8 trillion. what must

  The prediction of the solow-swan model

Using equation y*=A(k*)^(1/3), the prediction of the Solow-Swan model, and assuming labor is constant; explain why the growth rate of TFP is equal to growth rate of GDP per capital

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd