Share
Explore BrainMass

Oil and the American economy correlation

When Oil goes up, what is affected in the American economy and how?
very briefly explain what happens (if anything) to each and why

Consumption
Investment
Government Spending
Imports
Exports
National Income
Aggregate Supply
Aggregate Demand
Inflation
Exchange Rates
Interest Rates

Solution Preview

When Oil goes up, what is affected in the American economy and how?
very briefly explain what happens (if anything) to each and why

Consumption: The total consumption goes up in monetary terms as oil has an inelastic demand.
Investment: Increased oil bill means that funds are less available for investment.
Government Spending: The government spending on essential oil bill goes up so the government spending on non oil items goes down.
ยท Two distinct patterns emerge. During the two-year period from 1997:1 to 1999:1, falling energy prices boosted the economy. If energy prices remained steady over this period instead, the growth rate of GDP may have been reduced by 0.3 percentage points However, during the next two-year period from 1999:1 to 2001:1, energy prices first rose dramatically, then began to decline again. If this rapid rise in energy prices had not occurred, there may have been as much as 0.7 percentage points of additional GDP growth. Over the entire four-year period, a steady energy price path could have potentially boosted GDP growth by 0.2 percentage points. In interpreting these values, keep in mind that any attempt to make a judgement about what might have occurred in the past based on an hypothetical experiment, cannot fully account for the dynamic events which shape history. Nonetheless, such an experiment can help to provide insights about the likely direction and potential magnitude of impact.

Imports: Due to the oil imports, the total money value of the imports goes down even though the real imports go down as less funds and foreign exchange is available for non oil imports.
Exports : The value of those exports that have oil as an input goes up increasing the value of the exports. The total quantity of goods and services exported may remain same or even ...

Solution Summary

This job offers an oil and the American economy correlation using sources to validate.

$2.19