What impact does declining oil prices have on inflation

Reference no: EM131740025

Discussion

Respond to the following:

In 1973, there was an oil supply shock created by OPEC (the Organization of the Petroleum Exporting Countries). Your textbook describes the supply shock as a source of the recession which lasted from 1973-1975 because it shifted the US aggregate supply (AS) curve inward to the left, relative to aggregate demand (AD).

• Now that oil prices are dropping, use aggregate demand (AD) and aggregate supply (AS) to explain why this is good for consumers.
• What impact does declining oil prices have on inflation?
• Is there a downside to low oil prices? Who are the winners and losers in the economy?

Reference no: EM131740025

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