Read the two statements and choose the correct option.
I. If planned saving exceeds planned investment, income will fall.
II. If planned investment exceeds planned saving, firms' stocks pile up.

Only ICorrect answerYour answerOnly IICorrect answerYour answerBoth I and IICorrect answerYour answerNeither I nor IICorrect answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer A

Correct answer: A

S > I means spending falls short of output, so firms cut production. I is true.
I > S means spending exceeds output, so stocks run down, not pile up. II is false.

Ten questions from Income Determination & the Multiplier, at your own pace.

Ten questions from Income Determination & the Multiplier, at your own pace.

Read the two statements and choose the correct option.I. If planned saving exceeds planned investment, income will fall.II. If planned investment exceeds planned saving, firms' stocks pile up.