Question

Consumption is​ $5 million, planned investment spending is​ $8 million, government purchases are​ $10 million, and net exports are equal to​ $2 million. If GDP during that same time period is equal to​ $27 million, what unplanned changes in inventories​ occurred?

Answer 1

The answer is: There was an unplanned increase in inventories of $2 million

Step-by-step explanation:

To determine what unplanned changes might have happened to inventories (which is part of the total investment component) we must subtract all the other components form the total GDP.

GDP = consumption + (planned investment + inventories) + government + net exports

inventories = GDP - (consumption + planned investment + government + net exports)

• inventories = $27 million - ($5 million + $8 million + $10 million + $2 million)
• inventories = $27 million - $25 million = $2 million

So inventories increased by $2 million