What is the relationship between saving and investment?
What I understand is that as saving increases, investment increases because there is more money to be loaned out. However, an increase in saving coincides with an increase in interest rates, which decreases investment. So in that case how does saving positively correspond with investment?
Investment best answer:
Answer by Bored Goblin
interest rate is price of money, saving is supply of money, investment is demand for money.
depending on what changed the interest rate, either the supply or demand shift, and this determines the response of equilibrium quantity of savings=investment.
Investment
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