Sign Up Now
Get instant access to over 1 million+ study documents
OR
Already registered? click here to login
By creating your account, you agree to our terms of service, privacy policy and student honor code.
¶ … oil shock (like the one now looming as a result of the impending war with Iraq) will affect the United States economy.
War with Iraq is imminent. While any degree of instability in the Middle East region is reason enough to worry, when one couples this reality with the fact that Saddam Hussein is widely considered to be unstable, the recipe for disaster is compounded many-fold. Unfortunately for the United States, this disaster will not be contained to the immediate region of the Persian Gulf. The oil supply disruption that is sure to follow the launching of an attack by American troops will reverberate throughout the world and will hit the U.S. economy especially hard because of its high dependence on this fossil fuel.
Synopsis of Issue
To get some kind of perspective on this issue, consider the extent of the known oil reserves in Iraq. According to reliable estimates these reserves alone "could cover current U.S. imports for almost a century." Now add to this vast reserve the 220 billion barrels of oil that may still be under the ground in Iraq (Zagorin, 2003, p. 32). If forced into a corner, Saddam could sabotage these very reserves as well as the oil fields of his neighbors. In this scenario, "a major shortfall of up to 6 million bbl. A day - 8% of world consumption...
33). This type of a cut in supply would send such a shock through the oil market that prices could hit $80 per barrel before the situation could be brought under control (Zagorin, 2003, p. 33).
Macroeconomic Effect on the National Economy
The relevance and currency of this issue is clear. The only question which needs to be addressed is: "How will an oil shock like the one described above affect the United States Economy?" For starters, the U.S. is highly dependent on imported oil. While in 1973 imports of oil were 35% of total consumed oil, by 2000 this percentage had increased to 50%. Some economists expect that by 2020 this will be 64% (Energy, n.d., p. 1). Therefore, unless the politicians in Washington decide to allow development in Alaska (or scientists develop a truly viable energy alternative), the United States will be dependent on foreign oil for the foreseeable future. With this in mind, the remainder of the paper will deal with the two types of macroeconomic costs for the United States as a result of high oil prices: higher inflation/interest rates and decreased output/consumption.
Starting at the most basic level, when oil prices go up so do everyday prices of gas and heating oil. This increase will eventually show up in…
References
Energy Price Impacts on the U.S. Economy (n.d.) Retrieved February 12, 2003 at http://www.eia.doe.gov/oiaf/economy/energy-price.pdf.
Huntington, H.G. (1998) Crude oil prices and U.S. economic performance: Where does the asymmetry reside? The Energy Journal, Vol. 19, Issue 4. Retrieved February 12, 2003 from (http://www.iaee.org/documents/vol_19" target="_blank" REL="NOFOLLOW" style="text-decoration: underline !important;">http://www.iaee.org/documents/vol_19(4).pdf.
Pindyck, R.S. (1980) Energy Price Increases and Macroeconomic The Energy Journal, Policy
Vol 1 Issue 4 Retrieved February 12, 2003 at (http://www.iaee.org/documents/vol_1(4).pdf
Both saving on a microeconomic sense and saving on a macroeconomic sense entail taking he long-term view into perspective for it means surrendering immediate gratification for achieving long-term goals, sometimes -- as in the microeconomic context -- for individuals not rated to us and for the greater good as well as for generations to come. As Keynesian model shows, the nation can benefit more by placing its focus on domestic activities
U.S. Current Macroeconomic Situation: Similar to the rest of the world, the macroeconomic conditions in the United States are currently fragile. This is mainly because the rate of unemployment is high though is slowly declining, the currency valuation is fluctuating up and down, and the European financial unrest has continued to have significant impacts on the nation's economy. These conditions are coupled by a slow increase in manufacturing and upward trend
Macroeconomic Situation Delivering a speech to the American Bankers Association in Atlanta on June 7, 2011, Federal reserve Chairman Ben Bernanke posited a pessimistic view of current macroeconomic conditions. "The U.S. economy is recovering from both the worst financial crisis and the most severe housing bust since the Great Depression, and it faces additional headwinds ranging from the effect of the Japanese disaster to global pressures in commodity prices" (Hilsenrath, J.
S. government uses are the tax rolls. To further define this further, any analysis should consider present tax rolls as compared to their classical 1930's Great Depression era equivalents. What gives the issue an even more ominous pessimism is that we now have a garrison effect to our economy that Franklin Delano Roosevelt did not have to deal with, that is concurrent land wars in Asia and Africa. Tax Rolls-It looks
Macroeconomic and Microeconomics Differences With Examples: Microeconomics and Macroeconomics are two separate branches of the same field, economics. Together they help us better understand the market dynamics and economic forces that shape them. Macroeconomics deals with the aggregate performance of the economy, the industries and discusses such serious issues as inflation, unemployment and growth. Microeconomics on the study hand is solely concerned with the smaller picture. It is mainly concerned with
If the Fed is more concerned with the core CPI, then rates are unlikely to be raised this year. An increase in rates would slow the economy down. However, if total CPI increases at a faster rate, this could force the Fed to raise rates slightly. On the whole, however, the data does not support DESA's pessimism about the state of the American economy. The Federal Reserve is currently using