Investments and savings curve

Investments and savings curve

Investments and savings curve

The interest rate serves as the price for investments (demand
for loans) and savings (supply of loans), it determines national income and GDP
respectively (see Figure 3). At an interest rate r*, both savings and investments would
be in equilibrium and financial resources would be allocated in
the most efficient way. In theory, changes in the interest rate would not only have an impact on the monetary base in
an economy, but also on
investments, consumption and savings.


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