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To discover unplanned inventories:
We line up the equilibrium with zero unplanned inventories as can be seen in graph (b).
Then as Supply>demand, we know that there will be an excess of inventories that the producers
could not sell. This means that there is an unplanned increase in inventories. Thus, there is an
unplanned increase in investment, as they now have more finished stocks.
It is the opposite is Demand>supply.
Since these are unplanned inventories, we cannot reach equilibrium.…read more


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