Editing Keynesian economics (section)

====<span id=model>Keynes's economic model</span>====
Money supply, saving and investment combine to determine the level of income as illustrated in the diagram,<ref>Based on the one in Keynes’s Chapter 14.</ref> where the top graph shows money supply (on the vertical axis) against interest rate. ''M̂'' determines the ruling interest rate ''r̂'' through the liquidity preference function. The rate of interest determines the level of investment ''Î t''hrough the schedule of the marginal efficiency of capital, shown as a blue curve in the lower graph. The red curves in the same diagram show what the propensities to save are for different incomes ''Y'' ; and the income ''Ŷ'' corresponding to the equilibrium state of the economy must be the one for which the implied level of saving at the established interest rate is equal to ''Î''.

In Keynes's more complicated liquidity preference theory (presented in Chapter 15) the demand for money depends on income as well as on the interest rate and the analysis becomes more complicated. Keynes never fully integrated his second liquidity preference doctrine with the rest of his theory, leaving that to [[John Hicks]]: see [[#islm|the IS-LM model]] below.