If,at some level of output,total planned expenditures are less than the level of real national income,

Question

Quizplus · Accepted Answer

If total planned expenditures are less than the level of real national income, it means there is less demand for goods and services than what is currently being produced. This will result in an increase in unplanned inventories for firms, which will cause them to reduce their production and hence lower the level of income. Therefore, output and income will fall in this scenario.

If,at Some Level of Output,total Planned Expenditures Are Less Than