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 $500 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 $500 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

When actual real GDP is higher than the equilibrium level, firms produce more than what is being consumed, leading to unintended increases in inventory. This means that actual investment (which includes changes in inventory) is greater than planned investment.

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