Dear Student


If planned saving and planned investment are equal, then output, income, employment and price level will be constant.
 According to Keynes, it is the difference between planned saving and planned investment which causes fluctuation in the levels of output, income and employment.

In an economy planned savings exceeds planned investment

• Excess of planned savings (say, 18,000 crore) over planned Investment (say, 12,000 crore) means that expenditure in the economy is less than what producers had expected.
• This would result in undesired build-up of unsold stock.
• Consequently, AD(Aggregate Demand) falls short of AS(Aggregate Suply).
• Due to excess supply resulting from be stock piling of unsold goods, i.e., unintended inventories, the producers will cut down employment and will produce less.
• National income will fall and as a result planned saving will start until it becomes equal to planned investment.
•  at this point that equilibrium level of income is determined.

Regards