Current events report and analysis Essay Example | Topics and Well Written Essays - 500 words

Current events report and analysis - Essay Example As result of the increase in the supply of the oil, the price of the oil has gone down in the country. The demand for oil in the other oil consuming major countries like Spain and Italy had been due to the crisis that these countries have been experiencing. Thus among the other developed countries the both the consumption and the production of oil in the United States has been the highest (Norris 1). In respect to the above article, the demand and supply model has been fit and the analysis has been done from the perspective of the oil prices of the United States. The diagram below depicts the demand and supply of oil in the economy of US. The downward sloping curve is the demand curve and the upward rising curves are the supply curves. In the figure it can be seen that the initial supply curve of oil in the economy of US is given by S2 which was the supply of oil in the previous period. The demand and supply curve in the initial phase intersected at the equilibrium price of P2 and quantity Q2. In the present period the supply of oil in the economy increases and the new supply curve shifts to S1. Therefore at the same level of demand for oil in the economy the demand and supply curves intersect to form a new equilibrium the new equilibrium point is formed at the price P1 and at the quantity Q1. If the macroeconomic policy of aggregate demand and supply is applied to the article above it can be found that the rise in the consumption has resulted in a push in the demand for oil. This in turn has increased the level of supply of oil in the economy. In the above figure the aggregate supply and demand curve has been drawn. The initial aggregate supply curve is AS. Due to the rise in the production of oil the new aggregate supply curve would be at AS1. The rise in the production of the oil has led to the fall in the prices. As a result the price level of the economy decreases. The spending of the people increases the aggregate demand in the economy. This results in