Can you help me with this question please it is very hard Watch

Robertto
Badges: 3
Rep:
?
#1
Report Thread starter 1 year ago
#1
Extract F states that “The fall in oil prices has been a “Net Good” for the economy.”

Using the data in the extracts and your economic knowledge, assess the view a sustained fall in the price of oil can only have positive outcomes for the UK economy.
0
reply
GTHargs
Badges: 2
Rep:
?
#2
Report 1 year ago
#2
(Original post by Robertto)
Extract F states that “The fall in oil prices has been a “Net Good” for the economy.”

Using the data in the extracts and your economic knowledge, assess the view a sustained fall in the price of oil can only have positive outcomes for the UK economy.
To reword, this question is asking - speak about the advantages and then disadvantages of a fall in oil prices relating to how they affect the macroeconomic objectives, then at the end weigh up the arguments and give a judgement.

Advantages

Lower prices for consumers (retail prices and living costs) - SRAS shifts to the right - economic growth, reduced unemployment, reduced inflationary pressures. evaluation - how big is the fall in oil prices?/ will this tip the country into deflation(unlikely, more likely to be a positive force for reducing pressure on prices after the depreciation in the pound
Lower input costs - means high competitiveness and thus an improvement in the balance of payments- evaluation - lower oil prices will be benefitting everyone so unlikely to have a large effect, look at what percentage of costs energy effects
Reduction in absolute poverty as living costs fall - positive social implications, less dependence on welfare which is good for government budget (energy subsidies etc.). Evaluation - will this saving go towards reducing the deficit or new spending- how sustainable is current national debt levels?

Disadvantages

The UK exports oil - fall in export earnings - increase trade deficit
Oil producers are price takers mainly, a fall in oil prices will lead to a fall in output due to the upward sloping left to right MC/ supply curve - therefore unemployment. Evaluation - is it structural? will firms hoard labour? do these workers have occupational and geographical mobility?
Negative wealth effect, oil fund prices and energy company stock prices fall - lower wealth equals less consumption and lower AD - blah blah - may lead to investors panicking and fire selling stocks (unlikely, evaluation - how long and sustained will the lower oil prices be?

Judgement

Which one is the better argument, will it be a net benefit or damage to the economy, consumers, workers, society etc. Back up your decision with what you have written your essay. I would say it will be a benefit due to the positive implications it has for consumer prices, international competitiveness and poverty. But ultimately it doesn't matter what you say here so long as it is justified.
0
reply
X

Quick Reply

Attached files
Write a reply...
Reply
new posts
Latest
My Feed

See more of what you like on
The Student Room

You can personalise what you see on TSR. Tell us a little about yourself to get started.

Personalise

University open days

  • Solent University
    Postgraduate and Professional Open Evenings Postgraduate
    Mon, 25 Mar '19
  • Cardiff University
    Undergraduate Open Day Undergraduate
    Wed, 27 Mar '19
  • University of Portsmouth
    Postgraduate and Part-Time Open Evenings Postgraduate
    Wed, 27 Mar '19

Where do you need more help?

Which Uni should I go to? (149)
18.51%
How successful will I become if I take my planned subjects? (79)
9.81%
How happy will I be if I take this career? (137)
17.02%
How do I achieve my dream Uni placement? (114)
14.16%
What should I study to achieve my dream career? (79)
9.81%
How can I be the best version of myself? (247)
30.68%

Watched Threads

View All