1. Levels of capacity utilization are one of the factors that determine companies’ aggregate need for additional capital expenditure. Which of the following is another factor that affects the capital expenditure decision?

A. The rate of unemployment

B. The composition of the economy’s capacity in relation to how it can satisfy demand

C. The ability to reinstate orders canceled during the contraction stage.

2. Orders for technology and light equipment decline before construction projects in a contraction because:

A. businesses are uncertain about cyclical directions.

B. equipment orders are easier to cancel than large construction projects.

C. businesses value light equipment less than structures and heavy machinery.