Abstract
First, some definitions. Investment goods may be defined as all final goods with an expected life-time of more than one year. Consumption goods may be defined as all final goods with an expected life-time of less than one year. Consumption goods and investment goods thus exhaust total output. When saving is defined as income not consumed, it is immediately obvious why saving is identical to investment. Saving is not as it sounds a behavioral relationship, it is an accounting identity. Whenever there is an increase in investment the quantity of saving rises by the same amount. The question is, how does the increase in saving that satisfies the S ≡ I identity come about?
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