If planned leakages exceed planned injections,then Keynesians believe
A)The economy will quickly adjust to full employment if left alone.
B)Income will fall until planned leakages equal planned injections.
C)Investment will quickly rise to bring the system to equilibrium.
D)No macro equilibrium can be achieveD.Planned leakages greater than planned injections will cause consumption and saving to fall,thereby restoring macro equilibrium at a lower level of output and spending.

Question

Quizplus · Accepted Answer

Keynesians believe that if planned leakages (savings, taxes, and imports) exceed planned injections (investment, government spending, and exports), then there will be a decrease in aggregate demand, leading to a fall in income and output. This will continue until planned leakages equal planned injections, bringing the economy to equilibrium. Therefore, option B is correct. Option A is not correct because Keynesians do not believe that the economy will quickly adjust to full employment if left alone. Option C is not correct because Keynesians do not believe that investment will quickly rise to bring the system to equilibrium. Option D is not correct because Keynesians believe that there is a macro equilibrium at any level of output, and planned leakages greater than planned injections will cause a decrease in income and output, but will eventually bring the economy to a new equilibrium at a lower level of output and spending.

If Planned Leakages Exceed Planned Injections,then Keynesians Believe