If planned investment increases, equilibrium will be restored only when saving has increased by exactly the amount of the initial increase in planned investment, assuming there is no government or foreign sector.

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Quizplus · Accepted Answer

This is the basic Keynesian theory of equilibrium, where any increase in planned investment leads to an increase in income and therefore an increase in saving, which restores equilibrium. This assumes no government or foreign sector that can affect the equilibrium.

If Planned Investment Increases, Equilibrium Will Be Restored Only When