Table 13-2

-Refer to Table 13-2. Consider a simple economy that is made up of only two sectors, households and firms, and that investment is autonomous. Further, disposable personal income = real GDP. Suppose that actual real GDP in this economy is $300 billion in a particular period. We would expect to see
A) unintended reductions in inventory, planned investment will exceed actual investment.
B) unintended reductions in inventory, planned investment will be less than actual investment.
C) unintended increases in inventory, planned investment will exceed actual investment.
D) unintended increases in inventory, planned investment will be less than actual investment.

Question

Table 13-2
 
-Refer to Table 13-2. Consider a simple economy that is made up of only two sectors, households and firms, and that investment is autonomous. Further, disposable personal income = real GDP. Suppose that actual real GDP in this economy is $300 billion in a particular period. We would expect to see
A) unintended reductions in inventory, planned investment will exceed actual investment. 
B) unintended reductions in inventory, planned investment will be less than actual investment. 
C) unintended increases in inventory, planned investment will exceed actual investment. 
D) unintended increases in inventory, planned investment will be less than actual investment.

Quizplus · Accepted Answer

Unintended reductions in inventory occur when actual real GDP exceeds planned real GDP. In this case, actual real GDP is $300 billion, which exceeds the planned real GDP of $250 billion. This means that firms are producing more output than consumers are demanding, so inventories are increasing. Planned investment will exceed actual investment because firms are planning to invest more than they are actually investing.

Table 13-2 -Refer to Table 13-2. Consider a Simple Economy That Is