What is the difference between investment and saving in AD and AS chapter ... Both graphs should start from negative as both cant be done when income is 0
Dear Student,
The components of AD (Aggregate demand ) is consumption and investment when there is closed economy.And the components of AS (Aggregate supply) are Saving and consumption.In any equilibrium economy we have AD=AS
C+I=C+S
i.e. I=S
In this way we can say that in any equilibrium economy Investment is equal to savings.
But difference between them is that Saving is the part of AS and Investment is the part of AD.
In short period, investment is constant so it i horizontal line parallel to X axis and savings can be negative as there is some consumption even if income is zero,which lead to negative savings.
Hope this information will clear your doubts on this topic.
If you have any more doubts just ask on the forum and our experts will try to help you out as soon as possible.
Regards
The components of AD (Aggregate demand ) is consumption and investment when there is closed economy.And the components of AS (Aggregate supply) are Saving and consumption.In any equilibrium economy we have AD=AS
C+I=C+S
i.e. I=S
In this way we can say that in any equilibrium economy Investment is equal to savings.
But difference between them is that Saving is the part of AS and Investment is the part of AD.
In short period, investment is constant so it i horizontal line parallel to X axis and savings can be negative as there is some consumption even if income is zero,which lead to negative savings.
Hope this information will clear your doubts on this topic.
If you have any more doubts just ask on the forum and our experts will try to help you out as soon as possible.
Regards