18. Which of the following provides the most likely scenario subsequent to an es

Question

18. Which of the following provides the most likely scenario subsequent to an escalation of war in the Mideast? A. Households’ expectations with respect to energy costs will worsen. And they will be forced to budget less money for energy purchases, resulting in less income available for other purchases, which will lower C and Yd will decrease. B. Businesses will expect their energy operating costs to increase, resulting in higher ENRs in the investment formula. Hence, expected rates of profit will decrease and investment will likewise decline, resulting in a decrease in Yd. C. Households’ expectations with respect to energy costs will worsen. And they will be forced to budget more money for energy purchases, resulting in more income available for other purchases, which will lower C and Yd will decrease. D. Businesses will expect their energy operating costs to increase, resulting in lower ENRs in the investment formula. Hence, expected rates of profit will decrease and investment will likewise decline, resulting in an increase in Yd. E. None of the above is correct.

Explanation / Answer

option B is correct

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