StudentShare solutions
Triangle menu

Macroeconomics. The oils price - Essay Example

Nobody downloaded yet

Extract of sample
Macroeconomics. The oils price

However, how the various economic indicators behave during this short period of 'supply shock' and how they forecast performance or health of the economy in the coming period is the moot question.
Inflation may be defined as "state of economy, where there is a general and abnormal rise in price of all goods and services". Recession is a state of economy where there is a "slump in Gross Domestic Product in two or three successive quarters of a year with general price rise or fall". In the short run, when a price of a product which is consumed every sector of the economy which contribute to GDP have suddenly risen, other things remain the same, lead to rising prices all commodities and services, fall in real value of money and slow down of economic growth. This phenomenon is attributed to 'supply shock'.
Built-in inflation - induced by adaptive expectations, often linked to the "price/wage spiral" because it involves workers trying to keep their wages up with prices and then employers passing higher costs on to consumers as higher prices as part of a "vicious circle". Built-in inflation reflects events in the past, and so might be seen as hangover inflation. It is also known as "inertial" inflation, "inflationary momentum", and even "structural inflation.
Cost Push inflation or Supply...
Built-in inflation - induced by adaptive expectations, often linked to the "price/wage spiral" because it involves workers trying to keep their wages up with prices and then employers passing higher costs on to consumers as higher prices as part of a "vicious circle". Built-in inflation reflects events in the past, and so might be seen as hangover inflation. It is also known as "inertial" inflation, "inflationary momentum", and even "structural inflation.

SUPPLY SHOCK INFLATION OR COST PUSH INFLATION:
Cost Push inflation or Supply Shock inflation is caused by the rise in price of an important commodity for which there was no alternative, and consequent of which there was a general rise in price of all commodities and services. While the examples for cost push inflation are many viz., failure of monsoon/draught in an agrobased economy which would shoot up inflation etc.,. the best example in the modern industrialised countries, is rise in prices of petroleum prodoucts.

Dependence to petroleum products in any economy need not be emphasised and it may not be forgotten that the crisis faced by the world in the year 1970 is attributed to the rise in oil prices all over the world. Since, petroluem is important for moving the economy in all industrial including agricultural dependent countries, any upward movement in the price will cause a cascading movement in the price of all commodities and services and it will have persistant effect. However, there are different school of thought which opine, that the reduction in oil price after 1970 have not contributed in reduction in general price level, hence, rise in oil prices have not directly caused inflation in 1970. However, Keynesian economists argue that many prices are 'sticky ...Show more

Summary

This paper discusses whether the oils price shocks are responsible for both recessions and increases in the rate of inflation and whether we can expect inflation and recessions in world's major economies if the price of oil remains at or above the level reached during the past 12-18 months…
Author : dayanaraynor
Macroeconomics. The oils price essay example
Read Text Preview
Save Your Time for More Important Things
Let us write or edit the essay on your topic
"Macroeconomics. The oils price"
with a personal 20% discount.
Grab the best paper

Check these samples - they also fit your topic

Macroeconomics
Industry A has 20 firms and a Concentration Ratio (CR) of 20%. Industry B has 20 firms and a Concentration Ratio of 85%. Addressed in the paper are the names of these industry types, characteristics inherent, potential long run adjustments and implications of the anticipated adjustments.
4 pages (1000 words) Essay
Macroeconomics
Both the branches study economic issues and provide logical solutions to economic problems at different levels. While Microeconomics studies economic problems at an individual level, where the individual could be a person, a household or a firm; Macroeconomics studies them at the aggregate/national level as a whole.
6 pages (1500 words) Essay
Macroeconomics
Describe why this scenario is likely to be bad for the macro economy. This scenario runs counter to a sound fiscal policy. Financing deficit by borrowing in the futures through bonds with a premium interest is not a good prescription to finance additional expenditures.
6 pages (1500 words) Essay
Macroeconomics
Similarly, high unemployment rate does not augur well for the economy as it tends to raise the income disparity among the people. The paper attempts to explore how unemployment and inflation can be tamed through policy matters. The US has experienced high unemployment and high inflation rates in the past.
4 pages (1000 words) Essay
Macroeconomics. Price level
This relationship between inflation and unemployment is called the Phillips curve. The short term Phillips curve is a declining one as shown below. However, this is only an approximate representation of the short-term Phillips curve. In long-term, Phillips curve shows a lot of significant differences.
6 pages (1500 words) Essay
Macroeconomics
It further explains the rational expectations of labour markets to predict behaviour of economy, from a macroeconomic view. Through these models and theories, factors contributing to
8 pages (2000 words) Essay
Macroeconomics
The actual or realized expenditure is the amount households, firms and government spend on goods and services, i.e. GDP (Y), while planned expenditure (E) is the amount they would like to spend on the same goods and services. Now the three major determinants
4 pages (1000 words) Essay
Macroeconomics
Hence, the 4.87% change of M1 is instilled in the 7.14% change figure of M2. M1 changed because of the changes in currency floating in the economy and also because of increase in demand deposits. Traveler’s checks amount go down, but since currency and demand
7 pages (1750 words) Essay
Macroeconomics
On the other hand South Korea recorded the most impressive growth in its livings standards since 1960 because it posted a growth of 1304.5%, while the United States posted a growth of 166.2% since 1960. In
1 pages (250 words) Essay
Macroeconomics
In that context, President Obama needs to look into some aspects of the American economy, which have not only traditionally constituted the essentials of American economy, but a neglect of which has really diluted the American economy. America badly needs to restore its
2 pages (500 words) Essay
Hire a pro to write
a paper under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
YOUR PRIZE:
Apply my DISCOUNT
Comments (0)
Click to create a comment