"The oil price run - up of 2007 - 08 was caused by strong demand confronting stagnating world production. Although the causes were different, the consequences for the economy appear to have been very similar to those observed in earlier episodes, with significant effects om overall consumption spending and purchases of domestic automobiles in particular. The experience of 2007 - 08 should thus be added to this list of recessions to which oil prices appear to have made a material contribution". Oil price shocks have an evident impact on the short run aggregate supply curve. With the help of a graph demonstrate how rising oil prices affect the SRAS and explain what other factors can cause this shift.

"The oil price run - up of 2007 - 08 was caused by strong demand confronting stagnating world production. Although the causes were different, the consequences for the economy appear to have been very similar to those observed in earlier episodes, with significant effects om overall consumption spending and purchases of domestic automobiles in particular. The experience of 2007 - 08 should thus be added to this list of recessions to which oil prices appear to have made a material contribution". Oil price shocks have an evident impact on the short run aggregate supply curve. With the help of a graph demonstrate how rising oil prices affect the SRAS and explain what other factors can cause this shift.

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter12: Business Cycles And Unemployment

Section: Chapter Questions

Problem 5SQ

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“The oil Price run-up of 2007-08 was caused by strong demand confronting stagnating world production. Although the causes were different, the consequences for the economy appear to have been very similar to those observed in earlier episodes, with significant effects on overall consumption spending and purchases of domestic automobiles in particular. The experience of 2007-08 should thus be added to the list of recessions to which oil prices appear to have made a material contribution.” Source: Hamilton, J.D., 2009. Causes and Consequences of the Oil Shock of 2007-08 (No. w15002). National Bureau of Economic Research. a) Oil price shocks have an evident impact on the short run aggregate supply curve. With the help of a graph demonstrate how rising oil prices affect the SRAS and explain what other factors can cause this shift. b) Different theories…
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