Planned investment equals saving:
A)at all levels of GDP.
B)at all below-equilibrium levels of GDP.
C)at all above-equilibrium levels of GDP.
D)only at the equilibrium GDP.

Question

Quizplus · Accepted Answer

Planned investment equals saving only at the equilibrium GDP because at this level of output, there is no unplanned change in inventories, and thus, saving and investment are in balance. At other levels of GDP, there will be either a deficiency or excess in planned investment relative to saving, leading to changes in inventories and ultimately affecting economic activity.

Planned Investment Equals Saving