When planned investment is more than planned savings there will be following situation?

When planned savings is more than planned investment, then the planned inventory would fall below the desired level. To bring back the Inventory at the desired level, the producers expand the output. More output means more income.

What will happen if investment is more than savings?

When investment is more than savings , then the planned inventory rises above the desired level due to less consumption. Therefore to clear the unwanted increase in inventory, firms plan to reduce the output production in the economy due to which the National Income falls in an economy.

When planned saving is less than planned investment it indicates a situation when?

When planned savings is less than the planned investment , then the planned inventory rises above the desired level which denotes that the consumption is the economy was less then the expected level which indicates at less aggregate demand in comparison to aggregate supply.

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What will happen in economy if planned saving is greater than planned investment is i )? How does economy reach to equilibrium level of income explain with the help of diagram?

As given in the examination problem, when planned saving is greater than planned investment, then national income will decrease as shown in the diagram. When saving > investment [at { Y }_{ 1 }], then there would be stockpiling and producers will produce less.

When planned saving is less than planned investment then 1 point national income is likely to fall there will be no change in national income national income is likely to rise none of these?

then AD (or consumption expenditure) is more than AS. Production will have to be increased to meet the excess demand. Consequently, national income will increase . So, option4 is the correct answer.

Why saving is equal to investment?

A fundamental macroeconomic accounting identity is that saving equals investment. By definition, saving is income minus spending. Investment refers to physical investment, not financial investment. That saving equals investment follows from the national income equals national product identity.

Why is savings always equal to investment?

Saving is defined as income less consumption. … Since income equals expenditure, and consumption is itself, then income less consumption must equal expenditure less consumption. By the definition of saving and investment, saving and investment are always equal.

What is the difference between planned and actual investment?

In general, planned investment is the amount of investment firms plan to undertake during a year. Actual investment is the amount of investment actually undertaken during a year. If actual investment is greater than planned investment, then inventories go up, since inventories are part of capital.

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What is the difference between planned investment and unplanned investment?

In equilibrium, planned spending must equal actual spending in the economy. The difference between planned and actual expenditure is unplanned inventory investment. When firms sell less of their product than planned, stocks of inventories rise.

Why are ex-ante saving and ex-ante investment not always equal to each other?

Ex-ante savings and Ex-ante investment are not always equal because at different level of income Aggregate demand is not equal to aggregate supply.

Why AS curve is 45 degree?

The Aggregate Supply curve is represented by the 45° line. Throughout this line the planned expenditure is equal to the planned output. … The implication of 45° line is that in case of any disequilibrium, AS will be adjusted in a way to equate AD in order to restore equilibrium back.

Investments are simple