In a Keynesian model of income determination, when intended spending is greater than actual output, the adjustment to a new macro-economic equilibrium is based on changes in

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In a Keynesian model, when intended spending is greater than actual output, it implies that there are unplanned inventories. This means that firms have produced more goods than consumers are willing to purchase. To bring the economy back to equilibrium, firms will reduce their production, which will lead to a decrease in output and income. This adjustment process will continue until the level of output reaches the level of intended spending. Therefore, changes in unplanned inventories play a crucial role in restoring the equilibrium in a Keynesian model. The other options (A, C, D, and E) could also have an impact on the economy, but they are not directly related to the adjustment process when intended spending is greater than actual output.

In a Keynesian Model of Income Determination, When Intended Spending