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:

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