In the Keynesian model, whenever planned saving is more than planned investment
A) there will be unplanned inventory accumulation.
B) there will be unplanned inventory depletion.
C) real GDP will not be influenced.
D) the interest rate will remain unchanged.

Question

Quizplus · Accepted Answer

Whenever planned saving is more than planned investment, firms will have more unsold goods than expected, leading to unplanned inventory accumulation. This will cause firms to decrease output and employment, leading to a decrease in real GDP. To reduce the excess inventory, firms may also lower prices, ultimately leading to a decrease in the interest rate.

In the Keynesian Model, Whenever Planned Saving Is More Than