Question : Investment and savings are kept equal through a change in the level of
Option 1: Consumption
Option 2: Investment
Option 3: Government expenditure
Option 4: Income
Correct Answer: Consumption
Solution : Correct Answer is Consumption
By reacting to changes in interest rates, preferred savings and investment are kept equal.Without any desire on the part of the business to increase investment, the change in inventories balances savings and investment. Saving equals investment is a basic tenet of macroeconomic accounting. Savings are, by definition, income less expenditures. Investments must be made in physical assets, not in money.
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