If firms were faced with greater uncertainty because of concern that oil prices might rise, they might decrease expenditures on capital. In response to this change, someone who advocated "lean against the wind" policies might advocate

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"Lean against the wind" policies refer to government policies aimed at stabilizing the economy in response to external shocks. If firms decrease expenditures on capital due to uncertainty about rising oil prices, this could lead to a decrease in overall economic activity. To counteract this, the government could increase its own spending on infrastructure projects or other investments, which would stimulate economic growth and potentially offset the negative effects of decreased private investment. A decrease in the money supply or an increase in taxes or government expenditures would have the opposite effect and likely exacerbate the negative impact of decreased private investment. Therefore, increasing government expenditures is the most appropriate choice for a "lean against the wind" policy in this scenario.

If Firms Were Faced with Greater Uncertainty Because of Concern