If AE = 50 + 0.6Y and Y = 200, then unplanned inventories
A)increase by 75.
B)decrease by 30.
C)increase by 30.
D)decrease by 75.
E)do not change and equilibrium exists.

Question

Quizplus · Accepted Answer

To find unplanned inventories, we need to compare actual output (Y) to planned spending (AE):

AE = 50 + 0.6Y
AE = 50 + 0.6(200)
AE = 170

Planned spending is 170, which is less than actual output of 200. This means that unplanned inventories will increase, since businesses produced more than they planned to sell.

To calculate the amount of the increase in unplanned inventories, we need to subtract planned spending (AE) from actual output (Y):

Unplanned inventories = Y - AE
Unplanned inventories = 200 - 170
Unplanned inventories = 30

Therefore, the correct answer is choice C: increase by 30.