In an economy planned spending is greater than planned output. Explain all the changes that will take place in the economy.


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Planned spending refers to people planning to purchase final goods and services during the year. Planned output means the production units planning to produce final goods and services during the year.

When planned spending is higher than planned output, the producers find the stocks falling below the desired level. They start raising production. This raises income levels till inventories (stocks) reach the desired level and economy is in equilibrium.

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