The table shows the planned and actual additions to stock of three producers during a year (Rs):
| Producer | Planned addition to stock | Actual addition to stock |
|---|---|---|
| X | 80 | 50 |
| Y | 50 | 80 |
| Z | 60 | 60 |
Which of the following is correct?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → X’s ex post investment is less than her ex ante investment, and Y’s unplanned inventory investment is Rs 30.
Planned addition to stock is ex ante investment; actual addition is ex post investment. The difference is unplanned inventory investment.
X: actual 50 is less than planned 80.
Y: unplanned = 80 − 50 = 30.
Z: actual equals planned, so nothing is unplanned.
Option (1) X’s ex post investment is less than her ex ante investment, and Y’s unplanned inventory investment is Rs 80. — Incorrect. Rs 80 is Y’s whole actual addition; the unplanned part is only Rs 30.
Option (2) X’s ex post investment is less than her ex ante investment, and Y’s unplanned inventory investment is Rs 30. — Correct. X’s ex post 50 is below her ex ante 80, and Y’s unplanned inventory investment is Rs 30.
Option (3) Z has an unplanned inventory investment of Rs 60, as its stock went up. — Incorrect. Z added just what it planned, so its unplanned inventory investment is zero.
Option (4) X’s ex ante investment is Rs 50, and Y’s unplanned inventory investment is Rs 30. — Incorrect. X’s ex ante (planned) investment is Rs 80; Rs 50 is ex post.
NCERT (2026-27): “4.1 Aggregate Demand and its Components … Similarly, investment can mean the amount a producer plans to add to her inventory. It may be different from what she ends up doing. Suppose the producer plans to add Rs 100 worth goods to her stock by the end of the year. Her planned investment is, therefore, Rs 100 in that year. However, due to an unforeseen upsurge of demand for her goods in the market the volume of her sales exceeds what she had planned to sell and, to meet this extra demand, she has to sell goods worth Rs 30 from her stock. Therefore, at the end of the year, her inventory goes up by Rs (100 – 30) = Rs 70 only. Her planned investment is Rs 100 whereas her actual, or ex post, investment is Rs 70 only.” “4.2 Determination of Income in Two-sector Model … The inventory investment can take place due to two reasons: (i) the firm decides to keep some stocks for various reasons (this is called planned inventory investment) (ii) the sales differ from the planned level of sales, in which case the firm has to add to/run down existing inventories (this is called unplanned inventory investment).” |