With regards to The 1973 Oil Crisis, Describe the effect of the event on the cou

Question

With regards to The 1973 Oil Crisis, Describe the effect of the event on the country’s GDP, unemployment, and inflation rate thoroughly

Determine if the event caused high levels of unemployment or the inflation rate and explain thoroughly

Determine if the country experienced a recessionary or inflationary gap as a result and explain thoroughly

Determine if the event affected the US economy relative to other countries – for example, were there any effects on the value of the dollar and the US balance of trade; explain thoroughly.

Explanation / Answer

Determine if the event caused high levels of unemployment or the inflation rate and explain thoroughly

1973 oil crisis surfaced when price of oil was quadrupled by the OPEC. It severely and adversely affected GDP of US. Souring oil price led to significant rise in cost of production in USA. Thus, output level fell. Fall in output level led to the unemployment in USA. Oil crisis period was marked by stagflation. Increase in oil price led to fall in output and increase in prices of commodities.

Determine if the country experienced a recessionary or inflationary gap as a result and explain thoroughly

Country experienced both recessionary and inflationary pressures. Stagflation was hallmark of this period. Economy was unable to decide policy prescriptions to deal with such situation.

Determine if the event affected the US economy relative to other countries – for example, were there any effects on the value of the dollar and the US balance of trade; explain thoroughly.

Unlike today, US economy was heavily dependent on imported oil. Fluctuation in oil price thus had deep and sustained implications for US economy. US economy was in recession, so the dollar was losing its value. Dollar was depreciating even before the crisis when US withdrew from Bretton Wood. OPEC countries deliberating announced embargo against US for supporting Israel against Egypt.

Related Questions

Navigate

• Browse (All)
• Browse W
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.