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## What happens when investment is equal to saving?

A fundamental macroeconomic accounting identity is that saving equals investment. By definition, saving is **income minus spending**. Investment refers to physical investment, not financial investment. That saving equals investment follows from the national income equals national product identity.

## What makes national saving equal to investment in equilibrium?

The factor that makes national saving equal investment, in equilibrium, is: **the interest rate**. In examining the impact of fiscal policy, it is assumed that: consumption, investment, and the interest rate are endogenous variables.

## How is equilibrium attained in an economy through investment and saving approach?

According to this approach, the equilibrium level of income is determined at a level, **when planned saving (S) is equal to planned investment (I)**. In Fig 8.2, Investment curve (I) is parallel to the X-axis because of the autonomous character of investments. … At point ‘E’, ex-ante saving is equal to ex-ante investment.

## How do I calculate my savings level?

Subtract your spending from your income to figure how much you’re saving, then divide this number by your **income**. **Multiply by 100**.

## Why saving is equal to investment?

Saving = investment

This is because **investment is determined by available savings in the economy**. If there is an increase in savings, then banks can lend more to firms to finance investment projects. In a simple economic model, we can say the level of saving will equal the level of investment.

## Can public saving be negative?

The term (T – G) is government revenue minus government spending, which is public savings. **If government spending exceeds government revenue, the government runs** a budget deficit, and public savings is negative.

## How do you find the equilibrium level of savings?

Most simply, the formula for the equilibrium level of income is when **aggregate supply (AS) is equal to aggregate demand (AD)**, where AS = AD. Adding a little complexity, the formula becomes Y = C + I + G, where Y is aggregate income, C is consumption, I is investment expenditure, and G is government expenditure.

## How does the 45 degree model show the equilibrium income in the economy?

The 45-degree line shows all points where aggregate expenditures and output are equal. The aggregate expenditure schedule shows how total spending or aggregate expenditure increases as output or real GDP rises. **The intersection of the aggregate expenditure schedule and the 45-**degree line will be the equilibrium.

## What are the two alternative ways of determining equilibrium level of income?

The equilibrium level of income/output can be studied using the following two approaches. 2. **Saving and Investment approach (S and I approach)**. The two approaches are related as the savings curve can be derived from the consumption curve and vice-versa.

## What changes will take place to bring an economy in equilibrium?

What changes will take place to bring an economy in equilibrium if: (i) **planned savings are greater than planned Investment**; (ii) planned savings are less than planned investment.