Consumption is $141 billion, planned investment is $15 billion, and saving is $15 billion in a private, closed economy. At this level:
A) Actual investment does not equal planned investment
B) There will be unplanned increases in inventories
C) There will be unplanned decreases in inventories
D) The economy is in equilibrium

Question

Quizplus · Accepted Answer

In a private, closed economy, total output is equal to consumption, planned investment, and saving. Thus, the sum of these three components is equal to the total income generated in the economy. Since planned investment and saving are both equal to $15 billion, the total income generated in the economy is $171 billion ($141 billion + $15 billion + $15 billion). Therefore, there is no mismatch between actual and planned investment, and there will be no unplanned changes in inventories. The economy is in equilibrium.

Consumption Is $141 Billion, Planned Investment Is $15 Billion, and Saving