In the Keynesian model, whenever planned investment is less than planned saving
A) the amount of planned investment will decrease, and real GDP will decrease.
B) the amount of planned investment will decrease, and real GDP will remain unchanged.
C) there will be an unplanned inventory decrease, and real GDP will eventually increase.
D) there will be an unplanned inventory increase, and real GDP will eventually decrease.

Question

Quizplus · Accepted Answer

When planned investment is less than planned saving, it indicates that not all savings are being used for investment. This leads to an accumulation of unsold goods, or an unplanned inventory increase. According to the Keynesian model, this situation typically results in a decrease in production and thus a decrease in real GDP, as businesses adjust to the excess inventory by reducing output.

In the Keynesian Model, Whenever Planned Investment Is Less Than