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    Sharp rise in oil prices, which sends the price of gasoline

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    You are a member of the Federal Reserve Board. "There is a sharp rise in oil prices, which sends the price of gasoline to $5 per gallon, increasing the inflation rate, and sending the economy into recession."Given the following scenario, what would be your recommendations to stabilize the economy? Explain. Describe what would be experienced within the economy as a result of applying your recommendation. What are the possible shortcomings of your recommendation?

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    Solution Preview

    The response addresses the query posted in 805 words with APA references

    //The situation in which the price of goods and services increases is termed as inflation. This is one of the important issues at the macro-economy level, which should be addressed efficiently by the government of the country. The increase in the price of oil adversely affects the economy of the country. In this context, the steps are recommended by the member of Federal Reserve Board to control the inflation and stabilize the economy.//

    Recommendations to Control Inflation

    There exists a direct relationship between the price of oil and inflation. With the increase in the price of oil, the rate of inflation increases. Similarly, with the decrease in the price of oil, the rate of inflation decreases. Oil is the important factor that is used in most of the major sectors of the economy like transportation and industrialization. Hence, the increase in the cost of oil will lead to the increase in the price of the finished product of the companies leading to the increase in the inflation and drawing economies towards recession. The situation of inflation due to the change in the cost of production is regarded as cost-push inflation (Tucker, 2012). So, as the member of the Federal Reserve Board, it is my primary obligation to control the adverse effects of the increase in the oil prices in terms of increased inflation rate and shift ...

    Solution Summary

    The response addresses the query posted in 805 words with APA references.

    $2.19