Fracking activity on the american economy is significant

Reference no: EM133711176

Question: The most likely impact of COVID-19 on fracking is a decrease in oil production due to reduced demand and lower oil prices. With lockdowns and travel restrictions implemented worldwide, demand for oil plummeted as businesses shut down and people stayed home, leading to an oversupply of oil in the market. This oversupply, coupled with the decline in oil prices, made many fracking operations economically unviable, causing a significant reduction in fracking activity. In terms of the Aggregate Supply and Aggregate Demand (AS-AD) model, the decrease in fracking activity would result in a leftward shift of the short-run aggregate supply (SRAS) curve. This shift occurs because the decrease in fracking reduces the supply of oil, which is a key input in production across various sectors of the economy. As a result, the cost of production increases for firms, leading to higher prices for goods and services in the economy. This shift reflects the decreased ability of the economy to produce goods and services in the short run due to the decrease in oil supply. The impact of this decrease in fracking activity on the American economy is significant.

Reference no: EM133711176

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