Question

The Fed has decided to expand the money supply, leading to lower interest rates. As the CEO of an energy company, you react to these lower interest rates by deciding to expand your operations and construct a new pipeline across the state of Virginia. What impacts would this decision have on the macroeconomy

Answer 1

The answer are:

1. Raising Gross Domestic Product(GDP)

2. Reducing unemployment

C. increasing the investment part of GDP

Step-by-step explanation:

The impacts would be the following:

1. Raising Gross Domestic Product(GDP): Gross Domestic Product(GDP) is the market value of all final goods and services produced within a country during a specific period (usually a year). By deciding to expand your operations and construct a new pipeline across the state of Virginia, the CEO is adding to the country's GDP

2. Reducing unemployment: Expanding operations and construct a new pipeline across the state of Virginia, the CEO will create new employments because more hands will be needed for the expansion.

C. increasing the investment part of GDP. The components of GDP are Consumers' consumption, firms' investment, government expenditure, exports and imports. The expansion and the new investment (construction new pipeline) will increase the firms' investment component or variable.