<p>Investment is inversely proportional to the interest rate and savings is proportional to the interest rate, but if the quantity of savings increases, investment also increases according to the equation $I = S + T-G+M-X$. You can illustrate this by graphing the demand and supply of loanable funds on a 2-D plane (savings affects the supply of loanable funds), which shows how the two curves determine the real interest rate.</p>

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2015-06-09T10:23:08.637Z
Thanks. If you see savings and inv graph is a purely classical case. So how do I move on to prove the Paradox of Thrift.
Abhinav
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2015-06-09T12:29:50.730Z
I don't know what the paradox of thrift is.
ahorn
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2015-06-09T10:18:37.153Z
2015-06-09T10:18:37.153Z
ahorn
<p>HOw can it all be linked? I think I know but I am only a fresher so. </p>

<investment><saving>
Savings and investment relation to interest rate, loanable funds theory, paradox of thrift
Abhinav
# Savings and investment relation to interest rate, loanable funds theory, paradox of thrift

(Asked by: username_0 on 2015-06-09)

HOw can it all be linked? I think I know but I am only a fresher so.

**Tags:** investment, saving

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## 1 answers

### Answer by username_1 on 2015-06-09. Score: 1

Investment is inversely proportional to the interest rate and savings is proportional to the interest rate, but if the quantity of savings increases, investment also increases according to the equation $I = S + T-G+M-X$. You can illustrate this by graphing the demand and supply of loanable funds on a 2-D plane (savings affects the supply of loanable funds), which shows how the two curves determine the real interest rate.

> **Comments:**
> **username_0**: Thanks. If you see savings and inv graph is a purely classical case. So how do I move on to prove the Paradox of Thrift.  
> **username_1**: I don't know what the paradox of thrift is.  

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