Question: This problem also uses the data in Table 16-1. Table 16-1 Workings of the Accelerator Hypothesis of Investment for the Hypothetical Mammoth Electric Company (a)

This problem also uses the data in Table 16-1.
Table 16-1 Workings of the Accelerator Hypothesis of Investment for the Hypothetical Mammoth Electric Company

(a) What would expected sales have to be in periods 3 to 5 for net investment to be constant at 4.0?
(b) What would actual sales have to be in periods 3 to 5 to achieve a constant level of net investment?
(c) What would actual sales have to be in periods 2 to 4 to achieve a steady 20 percent increase in gross investment in each of the periods 3 to 5?
(d) At what rate do actual sales increase in part c?

Period Variable 1. Actual sales (Y) 2. Expected sales 0 10.0 10.0 12.0 12.0 120 120 12.0 10.0 11.0 5 1175 1187 ( 0.5Y1 0.5Y1) 3. Desired stock of electric generating stations 40.0 40.0 44.0 46.0 47.0 47.5 4. Net investment in electric 0.0 0.0 4.0 2.0 1.0 0.5 generating stations 5. Replacement investment 4.0 4.0 4.0 4.4 4.6 4.7 (D 0.10K) 6. Gross investment 4.0 4.0 8.0 6.4 5.6 5.2

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