Skip to content
Skip to main content

About this free course

Download this course

Share this free course

Economics and the 2008 crisis: a Keynesian view
Economics and the 2008 crisis: a Keynesian view

Start this free course now. Just create an account and sign in. Enrol and complete the course for a free statement of participation or digital badge if available.

4 Modelling equilibrium

We have said that the economy will be in equilibrium when planned saving matches planned investment. So we need to use our diagram to explore this relationship. First, we need to show planned saving. Our diagram already shows planned consumption at each level of income, and of course planned saving is simply the difference between income and planned consumption. Having shown saving, we need to go on to add investment to our model to complete our analysis of equilibrium.