How do you think will the oil prices increases affect the economy.?

Question

i)What kind of inflation will they cause and why?

ii)Is inflation the only outcome of this situation?(unemployment)

iii)What kind of policies should the government use to remedy the situation?

Answer 1

supply-side inflation (costs are rising)

unemployment too as increased costs drive some companies out of business

fiscal and monetary stimulus (tax breaks, lower interest rates)

Answer 2

Inflation is the "ONLY" outcome of higher energy prices. No policy the Fed implements will resolve this problem. The reason is that energy is no longer a domestic beast. It is now an international player. And any domestic policy ideas won't impact the international price of commodities..

We need a political policy to resolve this issue..  Our options are:

a) Use our Military to take over oil rich countries and just take their oil for our own uses.

b) Figure out a viable domestically produced source of energy that will power our vehicles and economy.

The choice is clear. Which political option will the next President choose?

Answer 3

lets just say high gas prices will eventually take alot of the working class off the road & most suburbs will turn into ghettos.