Use the Keynesian cross to illustrate the paradox of thrift. Model the change in savings behaviour as
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Use the Keynesian cross to illustrate the paradox of thrift. Model the change in savings behaviour as an increase in the marginal propensity to save, \(s_{1}\) (remember that \(c_{1}+s_{1}=1\) ). Show how a rise in investment can counteract the reduction in output associated with the rise in savings.
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Macroeconomics Institutions Instability And The Financial System
ISBN: 9780199655793
1st Edition
Authors: Wendy Carlin, David Soskice
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