Planned investment must equal actual investment for
A) the MPC to equal the MPS.
B) consumption to equal saving.
C) saving to equal income.
D) the economy to be in equilibrium.

Question

Quizplus · Accepted Answer

Planned investment refers to the amount of investment that is intended to be made in the economy. Actual investment refers to the amount of investment that is actually made. For the economy to be in equilibrium, planned investment must equal actual investment, since investment is one of the components of aggregate demand. If planned investment exceeds actual investment, there will be a surplus of goods, which will lead to a decline in output and employment until the planned investment equals the actual investment. If actual investment exceeds planned investment, there will be a shortage of goods, which will lead to an increase in output and employment until the planned investment equals the actual investment.

Planned Investment Must Equal Actual Investment for