Do you have frequently ended stock market rallies

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Oil Prices' Effect on Supply and Demand

Since fall of 2004, rising oil prices (over $70 per barrel in the Spring of 2006) have frequently ended stock market rallies and led to declines in all major stock indexes.

Draw an AS/AD diagram which shows the effect on the US macroeconomy of oil at $70+/barrel versus oil at $40/barrel.
Label your diagram clearly and explain how higher oil prices impact either AS, AD, or both.

Finally, explain why rising oil prices have negatively impacted US equity markets.

 

Reference no: EM1334980

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