Week 8 Discussion

Aggregate Demand and Supply

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.

Now the price of oil is dropping. Let’s look at what happens when the supply shock is favorable.

Use aggregate demand and aggregate supply to explain why current oil prices are so low. It is certainly good for consumers, but is there a downside as well?

When oil prices drop, who benefits and who loses? Why? How?