Business Studies
Write a 350- to 700-word analysis assessing how 1 of the following major economic events influenced supply, demand, and economic equilibrium in the US economic activity:
• Rapid price increases, such as caused by the 1973 oil embargo or the aftermath of a major hurricane
• Dramatic employment drops, such as the combined impact of the 2006 housing bubble burst and the subsequent Great Recession
• Crippling interest rates by the Federal Reserve, such as those of the 1975 – 1985 time period
• Collapse of the Soviet Union in 1991 and the end of the Cold War, and the “peace dividend”
• The dot-com bubble from 1994 to 2000, and the subsequent dot-com crash
Cite at least 2 academically credible sources. The use of charts and tables to illustrate data is highly
ANSWER
Several world events have played a role in influencing supply, demand and economic equilibrium in the US economic activity. Among them includes the oil embargo in 1973, employment drops in 2006, crippling interest rates by the Federal Reserve in 1975 to 1985, a collapse of the Soviet Union in 1991 and end of the Cold War and the dot-com bubble between 1994 and 2000 among others. In this research, an investigation is made on the impacts of these events on the economy.
The Organisation of Petroleum Exporting Countries (OPEC) comprises an association of fourteen oil-producing countries. In 1973, the organisation decided to halt all oil exports to the United States. The effects over the next six months was a quadrupled price on oil prices which remained very high after the end of the embargo on March 1974. In response to this crisis, the United States began inventions and innovations that would make them energy independent (TheBalance.com). The reason for all this was another economic event where President Nixon had randomly decided to remove the gold standard from the dollar. The price of gold went up and the dollar went down which was an offence to the OPEC countries who priced their oil in US dollars. This meant that revenue had fallen off making them impose the embargo in retaliation. This whole situation caused the 1973 to 1975 recession (TheBalance.com).
The United States government us very cautious never to have a repeat of the housing bubble from 2006 and 2007 and the recession that followed. Prudent measures in interest rates, lending and house prices have been made to keep their demand in check (Wharton University of Pennsylvania). The cause of this phenomenon was the illogical action od lenders to lend money to prospective home buyers without considering whether or not they would be able to pay. The mortgage finance market grew with 3 trillion dollars going into the new market. A lot of risks was suddenly in the economy and when the low interest suddenly started rising, a great recession followed behind.
Crippling interest rates by the Federal Reserve in 1975 to 1985 caused and fueled the Great Inflation from 1965 to 1982. It made economist re-evaluate policies that governed central banks and the Federal Reserve. This event has been largely blamed on the fact that this was a post-war period and yet the peace that emanated was unprecedented (Federal Reserve History). It was also during this period that there was an energy shortage caused by a trade embargo on oil. The effect of this was a redesign of the United States Microeconomic policies that influenced the ones we have now.
There was a serious loss of jobs that followed the wake of the end of the cold war that brought the United States and the Soviet Union to an agreement that would bring an end to the military competition that had been ongoing for a long time. Cuts in the military budget sent most of its employees home causing one of the highest job loss catastrophic rates in history. This caused something called the peace dividend where during a time of peace there are no dividends to collect.
Lastly, the dot com bubble refers to the introduction of the internet to the world. During the last half to the last decade of the 20th century, the internet changed the entire commerce sphere. There was more potential to e-commerce that caused a huge surge in internet companies that were also referred to as the dot coms. Unlike expectation, internet commerce did not pick up immediately and many businesses failed to precipitate the 2001 stock market crash that was also fuelled by the September 11 terrorists’ attacks to the United States
References
TheBalance.com. OPEC Oil Embargo, Its Causes, and the Effects of the Crisis. Retrieved on 16th July 2020 from https://www.thebalance.com/opec-oil-embargo-causes-and-effects-of-the-crisis-3305806
The Wharton University of Pennsylvania. The Real Causes and Casualties of the Housing Crisis. Retrieved on 16th July 2020 from https://knowledge.wharton.upenn.edu/article/housing-bubble-real-causes/
Federal Reserve History. The Great Inflation. Retrieved on 16th July 2020 from https://www.federalreservehistory.org/essays/great_inflation
