(a)OR(b)

If planned savings exceed planned investments in an economy, state its likely impact on output and employment.

(a)When planned savings exceeds planned investments it means households are planning to consume less than what the firms expected. As a result, planned inventory would rise above the desired level. To manage the inventories at the desired level, producers may contract production, reducing the employment and income level.(b)When planned savings are less than the planned investments it means households are planning to consume more than what the firms expected. As a result, planned inventory would fall below the desired level. To bring back the inventories at the desired level, producers may expand production raising the level of employment and output.