All inclusive us for This causes aggregate demand automatically to match aggregate supply. An increase in saving, in income not spent, causes aggregate demand to fall short of aggregate supply. But it also increases supply in the market for investment funds, which lowers the interest rate, such that ultimately extra investment offsets deficient aggregate demand. The empirical validation of Say’s Law is questionable, since many economists do not regard its formulation as precise enough to allow for satisfactory testing. Its policy implication is that of free markets without government intervention. Keynes neither believed in Say’s Law nor in the automatic supply-side adjustment of markets. He objected that a fall in the interest rate causes people to increase supply 815 long-run aggregate supply (LRAS) short-run aggregate supply (SRAS) aggregate B aggregate supply demand A Prices Prices Output Output The classical model The Keynesian model the amount of cash they wish to hold so that not all of an increase in saving will prompt higher investment. All inclusive us 2016.