If There Is a Large Increase in the Price of Oil

question 86

Multiple Choice

If there is a large increase in the price of oil and the Fed wishes to maintain stable output,which of the following should it do?

• A) Do nothing,because the self-correcting mechanism will adjust the economy
• B) Sell bonds in the open market
• C) Wait,because output seldom changes when there is an increase in the price of oil
• D) Encourage firms to not adjust the wages they pay
• E) Buy bonds in the open market.

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Definitions:

Undercapitalization

A financial condition where a company lacks sufficient capital to support its operations effectively, often leading to financial difficulties.

Corporate Façade

Refers to an outward appearance maintained by a corporation to conceal its actual purposes or state, often used in a critical context to suggest a lack of transparency or authenticity.

Escape Liability

A legal strategy or circumstance that allows an individual or entity to avoid responsibility for an action or outcome.

Limited Liability

Status that specifies that an individual’s liability will not go beyond his or her original investment.