Give an example of an event or incident that has taken place in the U.S economy which has a major economic impact be specific, e.g. 9/11 attack, natural disaster, rise or fall in oil prices and so forth.

What effect would this event have on AD or AS other things being constant?

What would be the resulting efffect of equilibrum price level?

Explain. What will be the effect of the different tools of fiscal policy to stabilize the economy?

Give examples of a built in stabilizer and explain how it would work to reduce this rise or in the level of AD

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Nestor RutherfordLv2

18 May 2018

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Give an example of an event or incident that has taken place in the U.S. economy which has a major economic impact--be specific, e.g., 9/11 attack, natural disaster, rise or fall in oil prices due to OPEC policies, consumer optimism or pessimism about an expected economic expansion or downturn, increase in government spending on healthcare, tightening of the legal and institutional environment, and so forth. What effect would this event have on AD or AS, other things being constant? What would be the resulting effect on equilibrium price level? Explain. What will be the effect of the different tools of fiscal policy to stabilize the economy? Give an example of a built-in stabilizer and explain how it would work to reduce this rise or fall in the level of AD.

sangriadeer475

Since Fall of 2011,the price of oil has shown a sharp increase again as continuationsteady rise in oil price attributed to the Arab Spring (thepolitical uprising in the Middle Eastern and North Africancountries) started in the beginning of 2011. This upward trend ofoil price has been further triggered by the recent tension in Iranon its Nuclear proliferation and the threat of blocking the oilexport through the Harmuz Strait. Accordingly, many analysts in theenergy field have predicted the likelihood of rise in oil price upto $5/gallon by coming summer in the US market.

Given the circumstances above about the oil market, draw an AS/ADdiagram, which shows the effect on the US macro-economy of expectedoil price @ $130+ per barrel versus the oil price at $100+ perbarrel (in the beginning of 2012). In your explanation in wordsabout the diagram, you must clearly explain the connectionbetween changes in oil price and the fluctuations in macroeconomicfundamentals in the US economy. Then show the impact ofcontinuous rise oil price on the US economy by using the AD-ASmodel during the recovery period of the economy from its greatrecession of 2008. (The most recent price of crude oil is about$104+/barrel).

http://www.bloomberg.com/energy/

Please see the url link here in addition an older WSJ article onoil price and macroeconomic effect I attached separately ashint.

Dated June 1, 2010:
http://online.wsj.com/article/SB10001424052748704269204575271213611411940.html?KEYWORDS=oil+price

Jan 28, 2011:
http://money.cnn.com/2011/01/28/markets/oil_egypt/index.htm

Label your diagram clearly and explain how higher oil prices impacteither AS, AD or both.

Finally, explain why sharp rise in oil pricesmight not necessarily have negative or positive impact on the USequity markets even at the current trend of volatile oilprices.

Note: Keep inmind that the oil price is not the same as the price level inmacroeconomics diagrams, even though the changes in oil priceindirectly affect the general price level (such as CPI and GDPD).You do not necessarily need to draw the diagram for oil market toanswer this question. However, drawing of macroeconomic model ofAD-AS behavior impacted by the changes in oil price isrequired.