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Question
If S > I, it will lead to ______.
Options
Excess demand
Deficient demand
Notional demand
Actual demand
Solution
If S > I, it will lead to deficient demand.
Explanation:
In economic terms, "S" often represents savings, while "I" represents investment. If savings exceed investment (S > I), it often suggests that not all savings are being used for investment, which may result in a buildup of unsold products and services, implying a lack of aggregate demand. This circumstance is generally connected with AS, which means that Aggregate Supply is greater than aggregate Demand.
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