1. Acme Manufacturing is producing $4,000,000 worth of goods this year and expec

Question

1. Acme Manufacturing is producing $4,000,000 worth of goods this year and expects 0 to sell its entire production. It also is planning to purchase $1,500,000 in new equip- ment during the year. At the beginning of the year, the company has $500,000 in inventory in its warehouse. Find actual investment and planned investment if Acme actually sells a. $3,850,000 worth of goods. b. $4,000,000 worth of goods. c. $4,200,00 worth of goods. Assuming that Acme's situation is similar to that of other firms, in which of these three cases is output equal to short-run equilibrium output? (LOI)

Explanation / Answer

(a) Actual investment if the Acme sells $3850,000 worh of goods if the Acme sells $3850,000 worh of goods , then its unplanned expenditure =$4,000,000 - $3850,000 =$150,000 Actaul investment = Planned investment + Unplanned investment Actual investment = $1500,000+$150,000 =$1650,000 (b) Actual investment if the Acme sells $4000,000 worh of goods if the Acme sells $4000,000 worh of goods , then its unplanned expenditure =$4,000,000 - $4000,000 =$0 Actaul investment = Planned investment + Unplanned investment Actual investment = $1500,000+$0 =$1500,000 (C) Actual investment if the Acme sells $4200,000 worh of goods if the Acme sells $4200,000 worh of goods , then its unplanned expenditure =$4,000,000 - $4200,000 =-200,000 Actaul investment = Planned investment + Unplanned investment Actual investment = $1500,000 -200,000 =$1300,000

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