Question

In the aggregate expenditure​ model, when is planned investment greater than actual​ investment?
A. Planned investment always equals actual investement in the aggregate expenditure model.
B. When there is an unplanned decrease in inventories.
C. When there is no unplanned change in inventories.
D. When there is an unplanned increase in inventories.

Answer 1

Answer:

The correct answer is B. When there is an unplanned decrease in inventories.

Explanation:

This happens when the final consumer demands more product than the company had estimated; this means that the demand rises unexpectedtly so companies are forced to increase their production by investing more which grows its expenses.

There are periods of the year where certain products are more demanded than others. Managers should identify these periods in order to consider it in the planned investment and also have enough inventory, preventing the unplanned decrease in inventories.