Macroeconomics Essay on Aggregate Demand and Aggregate Supply

1054 Words4 Pages
A. Fracking technology matures and significantly reduces the costs of producing oil and natural gas. First of all, the fact that the overall costs of producing oil and natural gas will be reduced, then companies will be able to produce more for the same costs or increase their profit margins. At higher aggregate supply, the price is likely to decrease, compensating the fact that the companies have reduced their costs and allowing them to produce at the same level for similar prices. Aggregate demand will also increase, mainly because the products and services that are associated with oil and natural gas will become more affordable. As aggregate demand increases, the price will also likely increase in the short-term, at least until aggregate supply and demand regulate themselves at a new level. Ideally, however, new technologies will make oil and natural gas more affordable, which would lower the overall price of products and services, since costs, including transportation costs, are lower. B. The European Union disbands and individual European countries enact large tariffs on the importation of American goods. There are several elements to be discussed about this event. First, the European Union is a customs union, in the sense that all the member countries enact the same tariff on a particular import of goods from the United States. This means that imports from the US of a particular good has a tariff that ranges from 0 % to higher levels. Disbanding means mainly
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