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Economics · 2022 · 3 marks
Determination of Income and EmploymentDetermination of Income in Two-sector Model3 marksAnalyseshort answer
CBSE 2022 · Region 2 · Set 1 · Q8
“In a hypothetical economy, planned savings fall short of planned investments, leading to fall in employment and income.” Do you agree with the given…
“In a hypothetical economy, planned savings fall short of planned investments, leading to fall in employment and income.”
Do you agree with the given statement ? Support your answer with a valid explanation.
Marking-scheme solution
The given statement is not true.
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 employment and income level.
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CBSE Class 12 Economics past-paper question from the 2022 board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.