Are you sure of this example? It does look like GDP is 200k in both cases. The first case looks wrong, if he pulls 25k from his savings, there will be -25k in savings (or investments as they are the same) and +25k in spendings. Effect is 0...
The maid spends money in the first case, also. In the first case the money flows through a 25k expenditure that it doesn't flow through in the second case.
You are assuming that investments don't bring spending. But that is wrong. If the maid does not get the 25, a company, a bank, a fund, will get it (as savings=investments). This means the 25 will flow in the economy in both cases.
In the first case he has 175 of investments (I) and 25 of consume (C).
In the second case he has 200 of investments.
If some of the downvoters can please explain in those terms where I am wrong, it would be nice. Please, show me where the +25 come from in the 1st case.
cynicalkane|14 years ago
viandante|14 years ago
viandante|14 years ago
maratd|14 years ago
viandante|14 years ago
In the first case he has 175 of investments (I) and 25 of consume (C).
In the second case he has 200 of investments.
If some of the downvoters can please explain in those terms where I am wrong, it would be nice. Please, show me where the +25 come from in the 1st case.