Real GDP is $8,000, autonomous consumption is $500, and planned investment spending is $200. The marginal propensity to consume is 0.8. (Scenario: Income–Expenditure Equilibrium) Look at the scenario Income–Expenditure Equilibrium. How much is unplanned inventory investment?

The correct answer is $900.

Explanation:

According to the scenario, the given data are as follows:

GDP = $8,000

Autonomous consumption = $500

Investment spending = $200

Marginal propensity = 0.8

So, we can calculate the unplanned inventory investment by using following formula:

GDP = ( autonomous consumption + investment spending) + (marginal propensity × GDP) + Unplanned inventory investment

So, $8,000 = $700 + (0.8 × $8,000) + Unplanned inventory investment

$8,000 = $700 + $6,400 + Unplanned inventory investment

$8,000 = $7,100 + Unplanned inventory investment

So, Unplanned inventory investment = $8,000 - $7,100

= $900

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