Question 1

An unexpected increase in inventories has

Accepted Answer

An unexpected increase in inventories indicates that current production has exceeded demand, leading to a surplus of supply. This surplus will likely result in a decrease in future production as the producer seeks to reduce the excess inventory. Therefore, the best choice is D.

Question 2

The tendency for investment to increase when aggregate output increases is the result of the ________ effect.

Accepted Answer

The accelerator effect refers to the response of investment to changes in the level of output. As output increases, firms tend to increase their investment in order to maintain or expand their production capabilities. This is known as the accelerator effect because changes in output accelerate changes in investment.

Question 3

The Unique Toy Company rents space by the square foot in a warehouse to store its inventory.The owner of the warehouse just doubled the rent he charges the Unique Toy Company.Everything else equal,the rent increase is likely to ________ Unique's optimal level of inventory.

Accepted Answer

With the increase in rent, it will become more expensive for the Unique Toy Company to store inventory. This will likely lead to a decrease in their optimal level of inventory as they will need to balance the cost of storage with the benefits of having inventory available for sale.

Question 4

Refer to the information provided in Figure 16.1 below to answer the questions that follow.  Figure 16.1
-Refer to Figure 16.1.Growth in aggregate output causes a ________ through the accelerator effect.

Accepted Answer

The answer of Refer to the information provided in Figure...

Question 5

The phrase that was coined by John Maynard Keynes to describe the feelings of investors was the ________ of entrepreneurs.

Accepted Answer

John Maynard Keynes coined the phrase "animal spirits" to describe the emotions of investors, such as their confidence or fear, that can impact economic decisions and fluctuations.

Question 6

The tendency for ________ to decrease when ________ decreases is the result of the accelerator effect.

Accepted Answer

The accelerator effect refers to the phenomenon where investment decreases as a result of a decrease in aggregate output. This is because businesses invest more when they anticipate higher demand (reflected in higher aggregate output) and invest less when they expect lower demand.

Question 7

When forming their expectations,firms gather information about all the following factors EXCEPT

Accepted Answer

Firms gather information about the projected demand for their specific line of products, the overall health of the macroeconomy, and the future plans of their competitors to form their expectations. However, they do not gather information about the historical supply of their competitors' line of products, as this does not directly impact their own production or sales.

Question 8

Refer to the information provided in Figure 16.1 below to answer the questions that follow.  Figure 16.1
-Refer to Figure 16.1.Which of the following could cause a movement from Point B to Point C?

Accepted Answer

The answer of Refer to the information provided in Figure...

Question 9

A firm is less likely to invest in new capital if

Accepted Answer

A firm is less likely to invest in new capital if it does not expect future sales to grow because there would be no need for additional capacity or equipment if demand is not expected to increase. Choices A, B, and D could actually lead to greater investment in new capital.

Question 10

The unemployment rate does not tend to fall as soon as the economy pulls out of a recession.Which of the following best explains this?

Accepted Answer

Firms may be holding onto excess labor during the recession so they do not need to hire new workers as the economy begins to recover. It may take time for firms to reduce their excess labor before they need to hire new employees.

Question 11

If a firm is able to produce the same amount of output even after reducing its labor workforce,this implies that the firm has

Accepted Answer

The firm's ability to maintain output levels with fewer workers indicates that it previously had more labor than was necessary for its production processes, hence the term "excess labor."

Question 12

Refer to the information provided in Figure 16.1 below to answer the questions that follow.  Figure 16.1
-Refer to Figure 16.1.Which of the following could cause a movement from Point C to Point B?

Accepted Answer

A movement from Point C to Point B represents a decrease in aggregate output and a decrease in the price level, which is typically caused by a decrease in aggregate demand. This decrease in aggregate demand could be caused by an increase in the interest rate, which would reduce investment spending and consumption spending.

Question 13

The costs that a firm incurs when it changes its production level are ________ costs.

Accepted Answer

Adjustment costs refer to the costs that a firm incurs when it changes its production level, such as retraining workers, purchasing new equipment or machinery, and changing marketing strategies. Accelerated costs refer to the increase in variable costs when a firm increases its production level. Sunk costs are costs that have already been incurred and cannot be recovered. Depreciation is the gradual decline in the value of an asset over time.

Question 14

Refer to the information provided in Figure 16.1 below to answer the questions that follow.  Figure 16.1
-Refer to Figure 16.1.If the economy is currently at Point C,pessimism about future growth in aggregate output moves the economy to Point

Accepted Answer

The answer of Refer to the information provided in Figure...

Question 15

Which of the following relationships is correct?

Accepted Answer

The equation for calculating the end of period stock of inventories takes into account the beginning of period stock of inventories (which is carried over from the previous period), adds the production (which increases inventory) and subtracts the sales (which decreases inventory). Therefore, the correct equation is option C.

Question 16

The desired level of inventories is the level at which the extra cost (in lost sales)from lowering inventories by a small amount is

Accepted Answer

The desired level of inventories is achieved when the extra cost from lowering inventories (in terms of lost sales) is just equal to the extra gain from lower inventories (in terms of interest revenue and decreased storage costs). This balance ensures that the inventory level is optimized for cost efficiency without sacrificing sales.

Question 17

Output is likely to respond more to sales increases in high-output periods than in low-output periods,provided that firms have enough capital and labor to support the output increase.

Accepted Answer

During high-output periods, firms have the resources to increase production and generate more sales. However, during low-output periods, firms may not have the resources to support an increase in production, and therefore, sales may not respond as strongly to output increases.

Question 18

Change in inventories equals the difference between

Accepted Answer

Change in inventories is the difference between the amount of goods a company produces and the amount that it sells. Option A is incorrect, as investment is not directly related to the calculation of inventory changes. Option B is incorrect because the difference between sales and investment does not provide information about the level of inventory. Option D is incorrect because depreciation refers to the decrease in value of fixed assets over time and does not provide information about inventory changes.

Question 19

At the beginning of 2013,the Shades of Gray Company has 8,000 pairs of sunglasses in stock.During 2013,the company produces 120,000 pairs of sunglasses and sells 112,000 pairs of sunglasses.The Shades of Gray Company's stock of inventory at the end of 2013 is ________ pairs of sunglasses.

Accepted Answer

The answer of At the beginning of 2013,the Shades of...

Question 20

Refer to the information provided in Figure 16.1 below to answer the questions that follow.  Figure 16.1
-Refer to Figure 16.1.Suppose the economy is currently at Point B.If investors are optimistic about future growth in aggregate output,investment

Accepted Answer

The answer of Refer to the information provided in Figure...

Quiz 16: Household and Firm Behavior in the Macroeconomy: a Further Look

An unexpected increase in inventories has

The tendency for investment to increase when aggregate output increases is the result of the ________ effect.

The Unique Toy Company rents space by the square foot in a warehouse to store its inventory.The owner of the warehouse just doubled the rent he charges the Unique Toy Company.Everything else equal,the rent increase is likely to ________ Unique's optimal level of inventory.

Refer to the information provided in Figure 16.1 below to answer the questions that follow. Figure 16.1 -Refer to Figure 16.1.Growth in aggregate output causes a ________ through the accelerator effect.

The phrase that was coined by John Maynard Keynes to describe the feelings of investors was the ________ of entrepreneurs.

The tendency for to decrease when decreases is the result of the accelerator effect.

When forming their expectations,firms gather information about all the following factors EXCEPT

Refer to the information provided in Figure 16.1 below to answer the questions that follow. Figure 16.1 -Refer to Figure 16.1.Which of the following could cause a movement from Point B to Point C?

A firm is less likely to invest in new capital if

The unemployment rate does not tend to fall as soon as the economy pulls out of a recession.Which of the following best explains this?

If a firm is able to produce the same amount of output even after reducing its labor workforce,this implies that the firm has

Refer to the information provided in Figure 16.1 below to answer the questions that follow. Figure 16.1 -Refer to Figure 16.1.Which of the following could cause a movement from Point C to Point B?

The costs that a firm incurs when it changes its production level are ________ costs.

Refer to the information provided in Figure 16.1 below to answer the questions that follow. Figure 16.1 -Refer to Figure 16.1.If the economy is currently at Point C,pessimism about future growth in aggregate output moves the economy to Point

Which of the following relationships is correct?

The desired level of inventories is the level at which the extra cost (in lost sales) from lowering inventories by a small amount is

Output is likely to respond more to sales increases in high-output periods than in low-output periods,provided that firms have enough capital and labor to support the output increase.

Change in inventories equals the difference between

At the beginning of 2013,the Shades of Gray Company has 8,000 pairs of sunglasses in stock.During 2013,the company produces 120,000 pairs of sunglasses and sells 112,000 pairs of sunglasses.The Shades of Gray Company's stock of inventory at the end of 2013 is ________ pairs of sunglasses.

Refer to the information provided in Figure 16.1 below to answer the questions that follow. Figure 16.1 -Refer to Figure 16.1.Suppose the economy is currently at Point B.If investors are optimistic about future growth in aggregate output,investment