Editing Saving (section)

== Interest rates ==
[[Classical economics]] posited that [[interest rates]] would adjust to equate saving and investment, avoiding a pile-up of inventories (general [[overproduction]]). A rise in saving would cause a fall in interest rates, stimulating investment, hence always investment would equal saving.

But [[John Maynard Keynes]] argued that neither saving nor investment was very responsive to interest rates (i.e. that both were interest-[[elasticity (economics)|inelastic]]) so that large interest rate changes were needed to re-equate them after one changed. Furthermore, it was the demand for and supplies of stocks of [[money]] that determined interest rates in the short run. Thus, saving could exceed investment for significant amounts of time, causing a [[general glut]] and a recession.