Question: According to Keynes, an increase in saving and a decrease in consumption may lower total spending in the economy. But how could that happen if

According to Keynes, an increase in saving and a decrease in consumption may lower total spending in the economy.

But how could that happen if the increased saving lowers interest rates (as shown in the last chapter)? Wouldn’t a decrease in interest rates increase investment spending, thus counteracting the decrease in consumption spending?

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Macroeconomics Questions!