Income and Expenditure - Investment Spending - Inventories and Unplanned Investment Spending

5 important questions on Income and Expenditure - Investment Spending - Inventories and Unplanned Investment Spending

What are inventories? And what are 2 reasons to have inventories

stocks of goods held to satisfy future sales
To quickly satisfy the buyers
To be sure they have a steady supply of necessary materials and spare parts.

What is inventory investment? And can there be negative inventory investment? Why?

is the value of the change in total inventories held in the economy during a give period.
Inventory investment can be negative  when a firm reduce its inventory over the course of a month.

What is the reason why increasing inventory investment can have a limit?

shelf space is limited
products can spoil

What is the actual investment spending? And what does it consist of? Formula?

The actual investment spending is the investment that occurs at the end of the period regardless of what was planned.
it consists of the panned investment spending plus the unplanned inventory investment.

What are the indicators of the changes in inventories?

Rising inventories  indicate that there is a positive unplanned inventory investment, and a slowing economy, aas sales are less than forecasted
falling inventory investment indicate that there are negative unplanned inventory investment and a growing economy as sales are greater than forecasted

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