If there is no government or foreign sector and planned investment equals planned saving, then

Question

Quizplus · Accepted Answer

If there is no government or foreign sector, the economy can be simplified to a closed economy. In a closed economy, planned investment equals planned saving in the goods and services market, which implies that there are no unplanned changes in inventories. This means that actual output is equal to planned spending on consumption and investment (A). Total spending on consumption and investment determines the economy's total income, which implies that consumption plus investment equals income (B). Finally, since there is no government or foreign sector, aggregate demand is equal to planned spending on consumption and investment, which means that the quantity of output produced is equal to aggregate demand (C). Therefore, all of the above options (A, B, C, and D) are correct.

If There Is No Government or Foreign Sector and Planned