What is the effect of a change in the level of investment? Wicksell (1935) was the first economist to pose this question explicitly in the context of his ‘pure credit economy’. Voluntary or anticipated saving is not a requirement if the banking system is willing to supply the necessary credit to finance an increase of investment demand. The effect of this increase of investment demand is an increase in the level of prices (if the level of output is fixed or given), or output if there is idle capacity and unemployed labour.
KeywordsEquilibrium Excess demand Expectations Hicks, J. R. Kalecki, M. Keynes, J. M. Investment Investment multiplier Multiplier analysis Real wage rate Saving Saving equals investment Shifting equilibrium Wicksell, J. G. K.
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