If GDP exceeds aggregate expenditures in a private closed economy:
A) Saving will exceed planned investment
B) Planned investment will exceed saving
C) Planned investment will exceed actual investment
D) Injections will exceed leakages

Question

Quizplus · Accepted Answer

If GDP exceeds aggregate expenditures in a private closed economy, it means that there is unplanned inventory accumulation. This indicates that firms are producing more than what consumers are buying, resulting in excess supply. To adjust to the excess supply, firms will cut back on production and increase saving. Saving, therefore, will exceed planned investment because firms have cut back on their investment plans due to the excess supply.

If GDP Exceeds Aggregate Expenditures in a Private Closed Economy