When a firm decides to keep some stocks for various reasons, it is called __________ inventory investment. When sales differ from the planned level and the firm has to add to or run down its existing inventories, it is called __________ inventory investment.
Which of the following options fills the blanks correctly?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → planned; unplanned
Stocks kept on purpose are planned inventory investment. Stocks that change because sales were not as expected are unplanned inventory investment.
Autonomous and induced describe consumption, and positive and negative tell only whether stocks rose or fell.
NCERT (2026-27): “4.2 Determination of Income in Two-sector Model … Change in inventory is called inventory investment. It can be negative as well as positive: if there is a rise in inventory, it is positive inventory investment, while a depletion of inventory is negative inventory investment. 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).” |