Low oil prices boost economic
growth:
"Sinking prices have
implications for economies across the globe. Important
oil exporters, such as the OPEC countries, bear the brunt
of negative impacts, while oil importers benefit. Overall
economic activity in the U.S. will benefit, although
lower oil prices will depress activity in many producing
states, such as Texas and North Dakota..... Depending on
which economic model is used, a 50 percent oil price
decline yields a 0.3 to 1 percent increase in U.S. GDP.
The traditional rule of thumb has been that a sustained
50 percent lower crude oil price raises the growth rate
by about 1 percentage point. However, since the U.S.
produces more oil and uses it more efficiently nowadays,
the traditional rule of thumb should probably be
halvedthe reduction should boost U.S. growth 0.5
percentage point for a year or so."
From: Dallas Fed Vol. 10 No. 3,
April 2015, "Economic Letter - Plunging Oil Prices: A
Boost for the U.S. Economy, a Jolt for Texas" by Anthony
Murphy, Michael Plante and Mine Yücel
https://www.dallasfed.org/assets/documents/research/eclett/2015/el1503.pdf
After this lesson you should be able
to use an AS/AD graph to illustrate the effects of low oil
prices on the US economy and use the graph to explan what
should happen to UE, IN, and EG.
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