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Principles of Macroeconomics / Unit 9   MAC 0821 short lesson, about 20 seconds

Planned and Unplanned Investment

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The idea

Unsold goods count as investment in inventories. Goods piling up unsold are unplanned investment; goods sold from stock are negative unplanned investment. Equilibrium is where unplanned investment is zero.

In practice

Inventories are the signal firms read before changing production.

Where people slip

The two sources differ on how sharply to draw this; the course keeps it, because it explains the adjustment.

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