At the short run equilibrium of income and employment, _____. |
Ex-ante saving = Ex-ante consumption Ex-ante investment Ex-ante consumption Ex-ante saving = Ex-ante investment Ex-ante saving = Ex-post investment |
Ex-ante saving = Ex-ante investment |
The correct answer is Option (3) → Ex-ante saving = Ex-ante investment In the short-run equilibrium of income and employment in an economy, the total planned (ex-ante) savings by households are exactly equal to the total planned (ex-ante) investment by firms. If ex-ante saving > ex-ante investment, aggregate demand falls short of aggregate supply, leading to a fall in income. Thus, equilibrium is reached only when ex-ante saving equals ex-ante investment. |