Investment will either increase or remain unchanged if the government has a trade surplus, a fiscal deficit, and unchanged savings.
Economists refer to investment as the production of goods used in the production of other goods. Contrary to popular belief, this definition does not include purchasing stocks or bonds (see stock market) as investments. Usually, investment results from reducing consumption.
The amount of loanable money will not be sufficient to meet demand if the government saves and runs a trade deficit, which would result in higher interest rates and less investment. Given that aggregate income equals the product of consumption and saving, or y=C+S, given saving will increase consumption, which in turn will increase income and production. The operation of the multiplier causes investment to increase as income does.
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