Macroeconomic analysis to determine effect rising oil prices

Reference no: EM1373632

Since fall of 2004, increasing oil prices [over $70 per barrel in the Spring of 2006] have frequently ended stock market rallies and led to refuse in all major stock indexes.

Make an AS/AD diagram which shows the effect on the United States macro-economy of oil at $70+/barrel versus oil at $40/barrel.
Label your diagram clearly and explain how higher oil prices impact either AS, AD, or both.

Finally, describe why rising oil prices have negatively impacted United States equity markets.

Reference no: EM1373632

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