scroll to top
Stuck on your essay?
Get ideas from this essay and see how your work stacks up
Word Count: 566
The article I have chosen to analyze is from ecomomistcom printed on June 10 2004 The title of the article is the crude art of policy making This article discusses weather the central banks should respond to the rise in oil prices by increasing interest rates It indicates how inflation is on a rise from 16 in February to 25 in May It is expected that inflation will rise to over 3 shortly They blame this rise on inflation on higher oil prices as they rose about 25 over a year ago The article indicates that higher oil prices hurt the oil-importing economy in two ways First it increases production and reduces profits Therefore it supplies fewer goods and services at a given price Second the higher oil prices transfer the income from oil importing counties to the oil producers This causes a negative supply shock and a negative demand shock in the economy This shock causes higher oil prices and pushes up inflation The article states that it depends upon how monetary policy reacts and how the demand curve for oil ends up An example shown is how policy reacted after the 1973-74 oil price increase reacted To prevent output falling Americas federal funds rate was cut from 11 to 6 during this time This resulted in sharply negative real interest rates This causes the demand curve to increase with the aim to support the output As a result the prices increased In order to bring inflation down the central banks had to increase the rate rapidly which later caused a deeper recession After learning this valuable lesson in the 1970s the central banks raised interest rates after the oil prices went up in 1979-80 and 1990-91 This was done in order to hold inflation down The lesson learned was that the central bank cannot prevent oil prices from boosting inflation but it must try to prevent the feeding into the higher paid wages
@Kibin is a lifesaver for my essay right now!!
- Sandra Slivka, student @ UC Berkeley
Wow, this is the best essay help I've ever received!
- Camvu Pham, student @ U of M
If I'd known about @Kibin in college, I would have gotten much more sleep
- Jen Soust, alumni @ UCLA