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Also, think of I=S as the point of where two curves intersect (saving and investment). The point is that the savings curve is way to the right and the investmen
by dimitar 12y ago
Also, think of I=S as the point of where two curves intersect (saving and investment). The point is that the savings curve is way to the right and the investment is way to the left. The curves still intersect though, but so what? That doesn't provide you with any judgement to which way the curves might shift.
- dmichulke 12y agoOK, I think the difference is whether the amount of money is fixed. If it were, global investment would equal global savings. In any case, it's locally possible to invest more (in nominal terms) than savings, both because money supply is increasing and there are always local imbalances. Typically, interest rate differentials take care of this in a free market. Reducing the interest rate in Germany would be one cure, another one would be hiking it in the importing countries. So I don't see the blame at one side only.