Evaluate the likely macroeconomic consequences of a significant fall in global oil prices
Edexcel A-Level Economics 25 Mark Question
Global oil prices fell from a 2008 peak of $147 a barrel to $27 in 2016. Evaluate the likely macroeconomic consequences of a significant fall in global oil prices. (June 2017)
Plan
- Paragraph 1
- Argument: one impact of a fall in oil prices is an increase in economic growth in the UK
- Diagram: right shift in SRAS
- Evaluation: question business confidence and investment in the UK
- Paragraph 2
- Argument: another impact of a fall in global oil prices is a current account deficit
- Diagram: left shift in AD
- Evaluation: question the PED of oil
- Other options:
- impact on oil-exporting countries
- impact on developing countries
- Conclusion: overall, lower global oil prices will cause a decrease in the price level in the UK but the impact on growth is uncertain as it depends on the PED of oil, and whether the trade balance improves or worsens
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