Suppose that planned spending for consumer and investment goods is greater than the level of total output produced by the economy, then:
A) the resulting shortage of goods and reductions in inventories will cause producers to increase their level of output and national income will rise.
B) an unplanned build-up in inventories with the result that national income rises.
C) a decline in national income because planned spending is less than actual spending.
D) either an increase or decrease in national income, it depends on the relative size of the marginal propensity to consume.
Respectively.

Question

Quizplus · Accepted Answer

When planned spending for consumer and investment goods exceeds the level of total output, it leads to a shortage of goods and reductions in inventories. Producers respond by increasing their level of output to meet the higher demand, which in turn causes national income to rise. This is because increased production requires more inputs, including labor, which leads to higher income for workers and, by extension, the economy as a whole.

Suppose That Planned Spending for Consumer and Investment Goods Is