Macroeconomics Question (1 Viewer)

[juber]

Hi, im just wondering if anyone can halp me out with this problem for my BBA103 assignment.

If Planned Investment = Planned Savings by definition (i.e. S=I as deduced from the equation C+I = C+S), then how does this example work:

If a supermarket spends buys 100 units, intends to save 20 and sell 100, but instead sells only 70 units and has unintended investment in inventories of 30 (instead of 20) then you could say this:

I(planned) < I(actual). Using the PLanned investment = planned savings you could therefore say:

S(planned) < I(actual), and since under the keynsian model
S(planned) = S(actual) (i.e. households plans are always realised), you could say that S(actual) < I(actual).

So i have deduced 2 equations:

1 - I(planned) < I(actual) and;
2 - S(actual) < I(actual)

In eq'n 1, if the supermarket is not selling stock, they will scale down production causing a reduction in output which is contractionary, HOWEVOR, eq'n 2 seems to suggest the exact opposite, when looking at the keynesian model diagram. Because when investment is more than savings, it is expansionary.

Where O Where have I gone wrong! Please help me!

 

[toisthbe]

Originally posted by juber

If a supermarket spends buys 100 units, intends to save 20 and sell 100

wtf are you on about?
how can a company save 20units and sell 100 units, if it originally just has 100units.

Originally posted by juber
S(planned) < I(actual), and since under the keynsian model
S(planned) = S(actual) (i.e. households plans are always realised), you could say that S(actual) < I(actual).

wtf are you on about again? ok what i can say is, you cannot mix household savings and investments, with a firms household savings and investments.

i fink you should just post the freaking quesoitn you've been asked, see what bos'er can do for ya, we're family. kinda.

 

[juber]

Originally posted by toisthbe
wtf are you on about?
how can a company save 20units and sell 100 units, if it originally just has 100units.



wtf are you on about again? ok what i can say is, you cannot mix household savings and investments, with a firms household savings and investments.

i fink you should just post the freaking quesoitn you've been asked, see what bos'er can do for ya, we're family. kinda.

Sorry, it was a typo, save 20 units and sell 80 units

This is all according to the lectures from vicky le plastrier.

The question is:

"critically evaluate the following statement:

Whilst planned savings by definition is equal to planned investment, equilibrium requires that realised saving equal realised investment"

 

[zxl]

hmm...if i did my econ properly, think that's a 2 sector model
anyways, the statment is fcuked and it should be
"realised savings by definition is equal to realised investment, equilibrium requires that planned saving equal planned investment, so unplanned investment = 0"

 

[zxl]

Originally posted by juber

1 - I(planned) < I(actual) and;
2 - S(actual) < I(actual)

and no ur equation is not true since I(planned) can be greater than I(actual), this occurs when there is excess demand, and I(unplanned) < 0. I(actual) = I(planned) + I (unplanned)

 

[~ForAGoodCause~]

wow, you seem to know your stuff.

So how about u write up a one page answer?, so i can plagarise ... please.

 

[juber]

Originally posted by zxl
and no ur equation is not true since I(planned) can be greater than I(actual), this occurs when there is excess demand, and I(unplanned) < 0. I(actual) = I(planned) + I (unplanned)

no those arent general equations, they are equations which apply to my example only. (with the chocolate bars)