Question

Differentiate between planned saving & investment versus actual saving & investment. Explain in 2 separate paragraph

Answer 1

Answer:

A. Planned Savings and Planned Investments:

All household planned (targeted) savings in the economy during the initial period of time (i.e. one year) are called planned (or pre-planned) savings.

Planned (or desired) savings are paid through a savings function (e.g. savings ratio) An investment that is planned or intended to be made or made by companies or entrepreneurs in an economy for an investment or at the beginning of a period (say, one year) is called a planned (or pre-existing) investment. The amount of the planned (or desired) investment is paid by the investment demand function (e.g. the relationship between the demand for investment and the interest rate).

The following points are significant in this regard:

(A) Equilibrium in the economy occurs only when planned investments and planned savings are equal. Previous savings and investments may or may not be the same. Only when pre-savings = equity pre-investment balances. This means the economy invests in what it has saved. Such a balance is rare because savers and investors are different people who save and invest for various purposes.

(Forbidden, actual savings and actual investment are always the same at all levels of income.)

(B) When the planned savings are not equal to the planned investment, i.e. when the planned expenditure is not equal to the planned output, the output may be adjusted up or down until the two are equal.

B. Actual savings and actual investment:

Actual savings are a measure of reality that took place measured after the fact:

Alternatively, pre-post (actual) savings means that families save on their income. In short, the savings in a year are called actual (or earlier savings).

Actual investment is the actual amount of investment that is calculated after the fact:

Alternatively, it refers to the actual investment made by all entrepreneurs in the economy over a given period of time. In short, a one-year investment is called an actual year investment (or earlier investment). Investment in Keynesian terminology means real and non-financial investment.

The point to note is that the firm's past investment as a savings-finance investment is always the same as the pre-post savings made by families at all levels of income. Past or experienced (or real) savings and investments are essentially the same and this is brought about by fluctuations in income. Since unplanned investments are also included in the investment, an experienced investment is always equal to the savings achieved.

C. Differences between pre-planned (planned) and pre-post (actual) investments:

A pre-planned or planned investment is an investment that is to be made by companies and planners in an economy over a period of time at an early stage. The plan given by the investment demand function is the amount of the planned investment (i.e. the relationship between the investment demand and the interest rate).

Actual Investment = Planned Investment + Unplanned Investment

Term pre-post or actual investment (e.g. one year) is called actual or pre-post investment calculated after reality. It is worth noting that Keynes was involved in investing in unsold goods, which he called unplanned investments. Thus, direct investment is equivalent to planned + unplanned investment. It should be noted that sometimes investments are made that were not included in the planned (objective) investment. This type of investment is called unplanned investment. Poor sales lead to unplanned investments when unsold assets accumulate. Thus, the direct investment of the economy is the total investment of planned investment and unplanned investment.

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