Keynes believed that an increase in savings would:
A)raise aggregate demand by reducing investment.
B)raise aggregate demand by increasing consumption.
C)reduce aggregate demand by reducing investment.
D)reduce aggregate demand by reducing consumption.

Question

Quizplus · Accepted Answer

Keynes argued that an increase in savings would lead to a decrease in consumption because people would be spending less. This decrease in consumption would then lead to a reduction in aggregate demand, as consumption is a major component of aggregate demand.

Keynes Believed That an Increase in Savings Would