● The economy is in equilibrium at the income level where the saving is equal to investment.
● If the planned savings are less than the planned investment it will lead to an increase in the production to meet the excess demand.
● The national income will increase which will increase the savings.
● This movement continues until saving is equal to investment.
● The equilibrium is established here because what the investors intended to invest will be equal to what the savers intended to save.
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