Question : 21) Which of the following statements true? A) Production and sales : 1381233

21) Which of the following statements is true?

A) Production and sales will fluctuate by the same amount and in the same direction over time.

B) Production will not fluctuate over time, but a firm’s sales will fluctuate over time.

C) Production will fluctuate somewhat over time, but not as much as sales fluctuates over time.

D) Production and sales will both fluctuate by the same amount over time, but in different directions.

22) Due to an increase in the birthrate, the Solid Wood Furniture Company expects an increase in the sale of its cribs over the next few years. The Solid Wood Furniture Company will most likely

A) keep current production constant, but plan to increase production in the future.

B) increase current production.

C) decrease current production so that it can increase production in the future.

D) not change its current investment plans, but plan to increase investment in the future.

23) Generally speaking, investment does ________ when aggregate output does ________.

A) well; poorly

B) poorly; well

C) well; well

D) not change; well

24) Which of the following types of expenditures is more volatile than plant and equipment investment?

A) consumption of durable goods

B) consumption of services

C) housing investment

D) consumption of nondurable goods

25) Which of the following types of investments is the most volatile?

A) inventory investment

B) plant investment

C) housing investment

D) equipment investment

26) Productivity fluctuates along a business cycle because

A) firms usually keep excess labor.

B) workers tend to become more productive during expansions.

C) workers tend to become less productive during expansions.

D) Both B and C are correct.

27) Provided that firms have sufficient capital and labor to support an output increase, monetary and fiscal policy are likely to be the most effective when

A) prices and inventory stocks are both high.

B) output and inventory stocks are both high.

C) output is low and inventory stocks are low.

D) output is low and inventory stocks are high.

28) If inventory stocks are low and firms have enough capital and labor to support an output increase,

A) monetary and fiscal policy will be very effective.

B) fiscal policy will be effective, but monetary policy will be ineffective.

C) monetary policy will be effective, but fiscal policy will be ineffective.

D) neither monetary nor fiscal policy will be effective.

29) There is an increase in aggregate demand, and firms do not have sufficient capital and labor to support an output increase. In this case, inventory stocks will

A) continue to fall, and there will be a large increase in the price level.

B) continue to increase, and there will be a large increase in the price level.

C) continue to fall, and the price level will fall.

D) remain unchanged, and the price level will remain unchanged.

30) The two channels through which monetary policy can influence behavior in the goods market are

A) investment and government spending.

B) investment and consumption.

C) government spending and consumption.

D) taxation and investment.

31) If firms believe that a downturn in sales and output is temporary and that increased output will be needed in the future, they may choose to

A) fire all their workers.

B) sell off the plant.

C) close a plant permanently.

D) reassign their workers to different jobs.

32) At low levels of output, the economy can expand with little or no increase in the overall price level because

A) at low levels of output the aggregate supply curve is negatively sloped.

B) people will be expecting the price level to fall.

C) there is excess supply so prices are kept low.

D) firms likely hold excess labor and capital, and production can be increased without causing input prices to increase.