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This example was In Exchange and Production and favored by Walter Williams on Midterms and Finals for his Microeconomics class at GMU.

Question Chapter 16, #12 a.Edit

"If the savings is defined as an increase in wealth and if investment is defined as an increase in wealth, then savings by definition is always equal to investment: for it is merely the same thing looked at from the point of view og tow different people." Since this statement is correct, how is it possible to speak of equilibrating the rate of investment and the rate of savings?

Similar to:

  • Grapes and Raisins
  • Corn and Whiskey
  • Plums and Prunes

AnswerEdit

Yes, A fall in the rate of interest

SourceEdit

  • Alchian, A. and Allen, W. : Exchange and Production: Competition Coordination and Control Wadsworth 1983

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