The economy can be in equilibrium if, and only if,
A) planned investment is zero.
B) actual investment is zero.
C) planned investment is greater than actual investment.
D) planned investment equals actual investment.

Question

Quizplus · Accepted Answer

In order to achieve equilibrium in the economy, planned investment should be equal to actual investment. This means that the amount that businesses plan to invest in capital goods and other productive assets should be equal to the actual amount that is invested. If planned investment is greater than actual investment, there will be an excess supply of goods and services, leading to a decrease in output and employment. If actual investment is greater than planned investment, there will be an excess demand for goods and services, leading to an increase in prices and inflation. Therefore, for the economy to be stable, planned investment must be equal to actual investment.

The Economy Can Be in Equilibrium If, and Only If