Explain how the Keynesian view differs from the classical view with respect to saving. Explain further how the two views differ with respect to investment

Classical economists believed that the amount of money saved and interest rates are directly related. Therefore, savers would save more at higher interest rates than they would at lower interest rates. The Keynesian view of saving is that savers may not necessarily save more at higher interest rates or save less at lower interest rates. If savers have a given targeted amount that they are saving towards, a higher interest rate will mean that they can actually save a smaller portion of their income to achieve that goal. Keynes held that saving is more responsive to income than it is to the interest rate.

The classical view of investment is that the amount invested is inversely related to interest rates. Therefore, businesses invest more at lower interest rates than they would at lower interest rates. The Keynesian view of investment is that the interest rate is not the only factor important in determining investment. Keynes held that other variables, such as business expectations, are also important determining factors in determining investment. If businesses are pessimistic about the future then they are unlikely to increase their level of investment, even if interest rates are relatively low.