Posted: December 28th, 2016

Describe how an increase in oil price in the global market may increase unemployment and inflation in the domestic market

) Zee is a developing country in South America. It does not produce any oil but buys oil from OPEC countries. The government of country Zee fixes a price ceiling for oil in their country. What will be the effect of the price ceiling on the demand for oil in the country? What will be the effect on the supply of oil in the country? Using appropriate graphs show how the price ceiling causes a shortage of oil in the country? (10 marks)

5) History indicates that economic recession in the USA has often coincided with increase in the price of oil in the global market. Describe how an increase in oil price in the global market may increase unemployment and inflation in the domestic market. (12 marks)