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

Question

Quizplus · Accepted Answer

To find the unplanned inventory, we need to find the difference between actual output and planned output, which is given by AE. 
When Y = 200, 
AE = 50 + 0.6Y
AE = 50 + 0.6(200)
AE = 170 
Planned output = Y = 200 
Unplanned inventory = Actual output - Planned output 
= AE - Y
= 170 - 200
= -30 
Since the unplanned inventory is negative, it indicates a decrease in inventories. Thus, the correct answer is D, "decrease by 30".