2. Keynes attacked the classical view that a market economy would generate full employment. He stressed two flaws in the classical argument.

(a) Saving and investment are carried out by different people and for different reasons.
\Vhen conditions are depressed, investment is likely to be far more responsive to business expectations, technological changes, and innovation than to the interest rate.
Similarly, income, rather than the interest rate, will be the primary determinant of saving. Therefore, the interest rate will not ensure that saving will equal investment at the full-employment output level.

(b) Wages and prices in the real world tend to be inflexible downward. Therefore, falling wages cannot restore full employment. Even if wages were flexible, falling wages would not restore full employment because declining wage rates would also reduce income, consumption, and aggregate demand.