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S-I approach

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S-I approach

Posted by Kajal Kanojya 6 years ago

CBSE > Class 12 > Economics

2 answers

Gurmanan Singh 6 years ago

Numerically when equilibriuk is struck, we have AD= AS AD can be written as consumption plus investment and AS can be written as Consumption and Savings thus C+I = C+S cancelling C we get S=I

Gurmanan Singh 6 years ago

We can explain Savings and Investments approach by three cases- a.) S > I : its is a case where people save more than they invest..which results in goods remaining unsold..this results in lesser production...this to lesser incomes...and this leads to decrease in savings so as to equal the savings and investment b.) S < I : its a case where investments are more than the savings..which results in unfulfilled demand..so producers start producing more..leading to higher incomes..ultimately more savings c.) S = I : its a perfect case where there are equal saving and investments in an economy.

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