28 Macroeconomic Savings

Macroeconomic Savings are of fundamental importance for the economic balance equation:

    (28.1)

which can be integrated easily in a natural way to

.

We have used the fact that the sum of all the capital stockis represented by K and represents the annual increase in capital stock. In economic termsis now investment, because we can regardas the sum of new products:

    (28.2)

So we obtain the well known relationship60 in classical macroeconomics between investment I and savings S

    (28.3)

and so finally

    (28.4).


Nota bene: Savings S are always including interest rates (
) on the whole capital stock K, and Investments I are into real economy and into financial products too. This is very different to common classical economy, where is stated I=S to, but is meant as savings without interest rates and investment only to the real economy. This classical misconception leads to a lot of practical problems with predicting growth.