Answer to Question #235552 in Macroeconomics for Samra

Question

2. Using the consumption and saving data in question 1 and assuming investment is $16 billion, what are saving and planned investment at the $380 billion level of domestic output? What are saving and actual investment at that level? What are saving and planned investment at the $300 billion level of domestic output? What are the levels of saving and actual investment? Use the concept of unplanned investment to explain adjustments toward equilibrium from both the $380 and $300 billion levels of domestic output.

Answer 1

$380 billion level, saving = $24 billion; planned investment = $16 billion. Actual

saving = $24 billion; actual investment is $24 billion

At the $300 billion level, saving = $8 billion; planned investment = $16 billion. Actual saving

= $8 billion; actual investment is $8 billion

Unplanned inventories fall

-

8 billion

Unplanned inventories rise 8 billion