Suppose that Dell Corporation has 20,000 computers in its warehouses on December 31, 2009, ready to be shipped to merchants (each computer is valued at $500). By December 31, 2010, Dell Corporation has 25,000 computers ready to be shipped, each valued at $450.

a) Calculate Dell’s inventory on December 31, 2009.

b) Calculate Dell’s inventory investment in 2010.

c) What happens to inventory spending during the early stages of an economic recession?

Factors That Shift the IS Curve