Business Environment, 1st Edition by Pearson

| 6 | Part I: Fundamental Concepts

short of planned savings, there will be a fall in income, output and

employment, leading to the contraction in the fl ow of money.

If the equality between planned savings and planned investment

has not been maintained due to an increase in savings, it will lead

to a fall in income due to fall in consumption and an increase in the

stocks of goods in shops. Then, prices will tend to fall consequent

to an increase in savings. The defi ciency of demand will lead to

the accumulation of stocks in shops causing retailers to cut down

orders. Consequently, with smaller inventories, fewer amounts of

goods will be produced. This, in turn, will lead to reduction in the

demand for capital goods such as machinery, components ...