Question

Javier is a department manager at a big box store. Over the last month, sales have slumped, and he has lots of inventory going unsold. Now it’s time to put in his orders to restock for next month. a. How, if at all, should Javier adjust his orders for new products? Javier should place his orders according to his initial estimates. The inventory buildup is not an equilibrium. Javier should respond by cutting back on his orders. Javier should wait and see what happens next month, and if his inventory runs out, then he can place an order. b. How will his suppliers respond to this decision? They will produce according to their initial demand estimates. They will cut back on production. They will not be affected. They will expand their output. c. Most other businesses are experiencing a similar decline in sales. Which

Answer 1

Question Completion:

c. Most other businesses are experiencing a similar decline in sales. Which of the following are is likely to occur as a result of the decline in sales?

Aggregate expenditure will fall.

Aggregate expenditure will rise.

Output will not be affected, and eventually, sales will rise to bring the economy back to equilibrium.

Output will fall in response to the decline, as businesses adjust their production.

Answer:

a. How Javier should adjust his orders for new products:

The inventory buildup is not an equilibrium. Javier should respond by cutting back on his orders.

b. How the suppliers will respond to Javier's decision:

They will cut back on production.

c. The consequences of the decline in sales are:

Aggregate expenditure will fall.

Output will fall in response to the decline, as businesses adjust their production.

Explanation:

Aggregate Expenditure determines the total amount spent by firms and households on goods and services during a specific period of time. Inventory management is one of the duties of Javier at the department store.  This involves ordering, warehousing, and processing inventory to achieve maximum customer satisfaction.