What is the difference between ex ante investment and ex post investment?
Ex ante investment refers to the planned or intended investment that producers propose to undertake during a specific period. It represents the desired addition to the capital stock or inventory.
Ex post investment refers to the actual or realized investment at the end of the period. It is the sum of planned investment and unplanned inventory investment.
The difference between the two arises when actual sales differ from planned sales. For example, if demand is unexpectedly high, producers sell from existing stocks, making ex post investment lower than ex ante investment. Conversely, if demand falls short, inventory accumulates unplanned, making ex post investment higher.
Explanation
The textbook distinguishes between 'ex ante' (planned) and 'ex post' (actual) measures. Ex ante investment is the amount a producer plans to add to inventory or capital. Ex post investment is what actually happens. The text illustrates this with an example: a producer plans to add Rs 100 (ex ante), but due to unforeseen demand, inventory only increases by Rs 70 (ex post). The difference (Rs 30) accounts for the unplanned inventory depletion. Thus, ex post investment includes both planned investment and any unplanned changes in inventory.