When the economy is in equilibrium in the simple Keynesian model
A) saving is greater than investment.
B) investment is greater than saving.
C) saving is equal to investment.
D) investment is equal to consumption.

Question

Quizplus · Accepted Answer

In the simple Keynesian model, equilibrium is reached where aggregate output (Y) is equal to aggregate expenditure (AE), which is equal to consumption (C) plus investment (I) plus government spending (G) minus taxes (T). Hence, saving (S) is equal to investment (I) in equilibrium (S=AE-Y=I).

When the Economy Is in Equilibrium in the Simple Keynesian