Answer:
a.$1,650,000 $1,500,000
b. $1,500,000 $1,500,000
c.$1,300,000 $1,500,000
Assuming that Acme’s situation is similar to that of other firms, output will equal to short-run equilibrium output in CASE B
Explanation:
Actual Investment, Planned investment
a.$1,650,000 $1,500,000
b. $1,500,000 $1,500,000
c.$1,300,000 $1,500,000
Assuming that Acme’s situation is similar to that of other firms, output will equal to short-run equilibrium output in CASE B
Acme’s planned investment in every case is $1,500,000.
Therefore the key to this problem is to find the amount of unplanned inventory investment Acme makes then add this to their planned investment to find Acme’s actual investment
a. If Acme sells $3,850,000 worth of goods, it has unplanned inventory investment of $150,000 and total actual investment of $1,650,000.
$4,000,000-$3,850,000=$150,000
$1,500,000+$150,000=$1,650,000
b. If Acme sells $4,000,000 worth of goods as it planned, its actual investment of $1,500,000 isequal to its planned investment
$4,000,000-$4,000,000= $0
$0+$1,500,000=$1,500,000
c. If Acme sells $4,200,000 worth of goods, it must draw down $200,000 worth of goods from itsexisting inventory, implying that inventory investment is –$200,000.
$4,000,000-$4,200,000= -$200,000
Acme’s actual investment in this case is $1,500,000 – $200,000 = $1,300,000.
Output equals short-run equilibrium output in CASE B , so planned spending and actual spendingare equal.
