Question

1. True or False: Uncertainty usually slows investment and keeps resources in less productive uses.

2. True or False: Large increases in oil prices are positive shocks to aggregate demand.

3. True or False: A decrease in the supply go oil makes capital and labor less productive.

Answer 1

a) True, uncertainty in the market will reduce the investment in the market and decrease the productivity of the resources, business thrive in an stable environment.

b) False, Large increase in the oil prices are a negative supply shock that result in stagflation.

c) False. The labor and capital are equally productive but the price of the resources increase. and that slows down the demand and cause a decline in the economy.