Question

Why is GDP not maintainable if the actual investment is greater than planned investment?

Why is GDP not maintainable if the actual investment is greater than planned investment?

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Answer #1

Planned investment is amount of investment which is actually planned by the government and it is just like the budgeted investment but actual investments are the investment which are undertaken by the government, so if the actual investments undertaken is higher than the planned investment, it would mean that inventory are bound to go up and when the inventory are bound to go up, the capital will also get impacted because inventory are the part of the capital.

This increase in the inventory due to variation of actual investment from planned investment will lead to reduction in the overall output in the economy and then there would be the Gross Domestic product reduction as well, because Gross Domestic product reflects the value of the output in the economy from all the sectors so Gross Domestic product will not be maintainable as output is reduced.

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