How will an increase in the world price of crude oil influence the economy of an oil-importing country such as the United States?
a. Aggregate supply will decrease, leading to a decrease in real GDP.
b. Aggregate supply will increase, leading to an increase in real GDP.
c. Aggregate supply will increase, leading to an increase in prices and smaller GDP.
d. A change in the price of an imported good will not affect the domestic economy of an oil-importing country.
Question 2
One reason that people hold money is to pay for unexpected car repairs and other unpredictable expenses. This motive for holding money is called:
a. transactions demand.
b. precautionary demand.
c. speculative demand.
d. noncyclical demand.
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