Next Year's Expected Price of Oil Is $90 Per Barrel

question 149

Multiple Choice

Next year's expected price of oil is $90 per barrel. If the interest rate climbs from 5 per cent to 20 per cent per year and nothing else changes, then, according to the Hotelling Principle, the price of oil this year

• A) will rise.
• B) could rise, fall or stay the same.
• C) will not change.
• D) will fall.

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Definitions:

Lottery Proceeds

The revenue generated from the sale of lottery tickets, often allocated to public sector projects or education.

Fungible Good

Items that are interchangeable because they are of equal value or identical in important aspects.

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A distinct item of personal property that can be recognized individually, as opposed to being a fungible part of a larger quantity.

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A gift that, once given, cannot be taken back or annulled by the donor.