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Author Question: OPEC's incentives to produce a stream of long-term profits for its member nations means that oil ... (Read 115 times)

arivle123

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on: Jun 29, 2018
OPEC's incentives to produce a stream of long-term profits for its member nations means that oil stocks will
 
  A) probably last quite a while.
  B) most likely run out quickly.
  C) not be used or needed in the near future.
  D) increase indefinitely.

Question 2

If the Fed wants to close a recessionary gap, should it buy or sell government securities? Why?
 
  What will be an ideal response?


lucas dlamini

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Reply #1 on: Jun 29, 2018
Answer to Question 1

A

Answer to Question 2

The Fed should lower the federal funds rate by purchasing government securities. When the Fed buys government securities, the quantity of money increases and quantity of loans increases. The increase in loans increases the supply of loanable funds so the real interest rate falls. As a result, consumption expenditure, investment, and net exports increase, which increases aggregate demand. The increase in aggregate demand increases real GDP, which is the policy required when real GDP is less than potential GDP, that is, when the economy has a recessionary ga


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