1. This passage contains perhaps one of Keyness most original argument. Explain in your own words what economic adjustment mechanism Keynes is describing. What is the relationship between savings and investment that Keynes is asserting? Why is this hypothesis significant for economic policy?

The rise in the rate of interest might induce us to save more, if our incomes were unchanged. But if the higher rate of interest retards investment, our incomes will not, and cannot, be unchanged. They must necessarily fall, until the declining capacity to save has sufficiently offset the stimulus to save given by the higher rate of interest.

NO PLAGIARISM! please type! 300-400 words