In the context of macroeconomics, what is planned investment?

• A. The government’s expenditure on public infrastructure projects.
• B. The amount of investment that firms intend to make during a specific period, regardless of actual sales or inventory changes.
• C. The total amount of money households plan to save in a given year.
• D. The actual amount of investment that occurs, including unplanned changes in inventories.

Answer: (B)

Verified step by step guidance

1. Understand that planned investment refers to the amount of investment that firms intend to make during a specific period, focusing on their intended spending on capital goods like machinery, buildings, and equipment.
2. Recognize that planned investment is different from actual investment because actual investment includes unplanned changes in inventories, which occur due to differences between expected and actual sales.
3. Note that government expenditure on public infrastructure is a form of government spending, not planned investment by firms, so it should be excluded from the definition of planned investment.
4. Understand that household savings represent a different economic concept related to income allocation and are not directly related to planned investment by firms.
5. Summarize that planned investment is the intended spending by firms on new capital goods during a period, independent of actual sales outcomes or inventory adjustments.