Final answer:
A firm aiming for a more stable forecast using the simple moving average method should choose a higher value of N. Among the choices provided (2, 3, 6, 8), 8 is the highest and therefore the most stable option for generating a moving average that is less affected by short-term fluctuations.
Step-by-step explanation:
For a stable forecasting tool using the simple moving average method, it is essential to select an appropriate value of N, which is the number of periods to average. Choosing a higher value of N generally smoothens out the fluctuations more and provides a more stable forecast. However, it also makes the moving average less sensitive to recent changes. Conversely, a smaller N makes the average more sensitive to recent data but can result in more volatility and less stability in the forecast.
Based on the options provided (8, 3, 2, 6), the value of 8 would be the most stable choice. Although it's not always the case that a larger N creates the best forecast, among the given alternatives, a moving average of 8 periods typically balances well between smoothing out noise and providing timely signals for the given data set.
To elaborate, if a company seeks a balance between responsiveness to new information and stability of the forecast, choosing a middle ground like N=6 could also be considered. It would provide an intermediate level of smoothing. However, the highest given option of N=8 would give the most stable forecast.