Question

Explain the relationship among output, saving, and investment.

Answer 1

Higher investment leads to higher out increase in investment cause rightward shift in aggregate demand curve which increases output.

Saving also leads to increase in output higher saving leads to higher steady-state capital stock and higher level of output.

Saving = investment

Output produced either consument or added to the country's stock of investment.

Income earned either consumed or saved.

Which means Y=C+I and Q= C+S  

Y= Q aggregate output and income are always equal

C+I= C+s

I= S

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