Oil and Economic Recession
Two months ago (Sep. 2000), the world's economies faced a great problem. The oil price went enormously up and the Dollar followed the same tack. It was made very clear that almost all countries would have a serious problem due to oil's importance. Oil provides fuel for heating, transport, and machinery, and is a basic input for petrochemicals and many household products ranging from plastic utensils to polyester clothing. From the beginning of this century until 1973 the use of oil increased steadily. Economic activity was organized on the assumption of cheap and abundant oil.In 1973-74 there was an abrupt change. The main oil-producing nations belong to OPEC(the Organization of Petroleum Exporting Countries). OPEC decided in 1973 to raise the price for which their oil was sold. OPEC thought that cutbacks in the quantity demanded would be small since most other nations were very dependent on oil and had few commodities available as potential substitutes for oil. Thus OPEC correctly anticipated that a substantial price increase would lead to only a small reduction in sales volume. It would be very profitable for OPEC members. Between 1973 and 1974 the price of oil tripled, from $2,90 to $9 per barrel. After a more gradual rise
Recession is the second phase of the business cycle over a several-year period. It occurs right after the peak and right before the trough and the recovery phase. A decline in total output, income, employment, and trade lasting six months or more is called an economic recession. For example, suppose that a major factory in Athens closed. Hundreds or even thousands of workers would lose their jobs. If other companies in the area do not have jobs for them, these unemployed people will reduce their spending. Other local businesses will thus suffer drops in sales and perhaps cut their own work forces. The resulting recession may spread across the city or even the country. A particularly severe and long-lasting recession, such as the one that affected much of the world in the late 1930s, is called a depression. In the 1930s, the Germans had to pay massive fines because of the world war. The Americans gave those massive short-medium term loans to Europe and particularly to Germany. Then, due to their panic, the Americans withdrew their money . A chaos, which resulted in political changes, was created in Germany whereas in the USA all the taxes were increased. The New York stockmarket crashed and all the rest followed as a chain reaction to what was happening. That was the last time that the USA used taxation to control their economy. Since then, people have realized that all economies around the world are related and they try to keep a good balance because depression is a great decease for the world. In the late 1980s a major problem b
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Approximate Word count = 1041
Approximate Pages = 4 (250 words per page double spaced)
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