Refer to the information provided in Table 23.8 below to answer the question(s) that follow.
Table 23.8
-Refer to Table 23.8. If aggregate output equals ________, there will be a $200 million unplanned decrease in inventories.
A) $3,000 million
B) $4,000 million
C) $5,000 million
D) $6,000 million

Question

Refer to the information provided in Table 23.8 below to answer the question(s) that follow.
Table 23.8 
-Refer to Table 23.8. If aggregate output equals ________, there will be a $200 million unplanned decrease in inventories.
A) $3,000 million 
B) $4,000 million 
C) $5,000 million 
D) $6,000 million

Quizplus · Accepted Answer

According to the table, the planned investment is $400 million and the planned saving is $200 million. Therefore, the equilibrium level of output would be $5,000 million ($2,500/$0.5). Any level of output above or below $5,000 million would result in unplanned changes in inventories. A decrease in inventories by $200 million would occur if aggregate output was $4,800 million ($5,000 million - $200 million). Therefore, choice C ($5,000 million) is the only option where an unplanned decrease in inventories of $200 million is possible.

Refer to the Information Provided in Table 23