Refer to the information provided in Figure 23.10 below to answer the question(s) that follow. Figure 23.10
-Refer to Figure 23.10. At an aggregate output level of $500 million, there is a
A) $100 million unplanned increase in inventories.
B) $175 million unplanned decrease in inventories.
C) $0 change in unplanned inventories.
D) $100 million unplanned decrease in inventories.

Question

Refer to the information provided in Figure 23.10 below to answer the question(s) that follow.  Figure 23.10
-Refer to Figure 23.10. At an aggregate output level of $500 million, there is a
A) $100 million unplanned increase in inventories. 
B) $175 million unplanned decrease in inventories. 
C) $0 change in unplanned inventories. 
D) $100 million unplanned decrease in inventories.

Quizplus · Accepted Answer

At an aggregate output level of $500 million, the planned expenditure (PE) is less than the output (Y) by $50 million ($500 million - $450 million). This means that there is an unplanned increase in inventories. Since the unplanned increase is equal to the difference between PE and Y, which is $50 million, if output increases to $600 million, the unplanned increase in inventories will be $100 million ($600 million - ($450 million + $50 million)). Therefore, the correct answer is D.

Refer to the Information Provided in Figure 23