shianne spaulding and collia brown gas prices June2022

• Macroeconomics
• 12th Grade

Gas Prices in the United States

By shianne spaulding and collia brown 

By shianne spaulding and collia brown 

Inflation

Recently, gas prices have increased to five dollars in the United States. The general increase in inflation is impacting natural gas prices. This is a major issue since gas is a part of our daily lives. Without gas we wouldn’t be able to get anywhere efficiently which could be bad in case of an emergency. Additionally, the increase in gas prices are indirectly affecting the costs of transportation, manufacturing, and heating which can negatively affect economic growth.

Supply and Demand

Due to the increase in gas prices eventually a decrease in consumer demand for products will occur. Which will impact the trade of many products as the travel fee will also increase. Additionally, the means of transportation will start to decrease as fares will start to increase and as people start to depend less on their cars.

Taxes

The tax on gas is rising which are hurting consumers day by day as they are getting less gas at a higher price. Technically they are being robbed for an something that is an essential aspect in our lives.

One graph we can connect gas prices to is the Ad-As model graph. As the price of gas starts to increase then demand will decrease. Also it might be too much money to supply gas causing a leftward shift.

KEYNESIAN THEORY

A response to this increase could be beneficial from the Keynesian Theory. The Keynesian theory is a macroeconomic theory and model that describes how aggregate demand affects economic output and inflation. An expansionary fiscal policy that shifts aggregate demand to the left would be the Keynesian response. Expansionary fiscal policy entails cutting taxes or increasing government spending in order to reduce aggregate demand. 

John Keynes

John Keynes advocated for a government strategy to minimize unemployment and recover from economic downturns. He argued that, in addition to government job programs, increased government spending was recommended to reduce unemployment, even if it meant a budget deficit. Keynes’ theory connects with gas prices because if the government intervenes by having more money flow into the economy, the prices will begin to stabilize. 

One suggestion we have is government intervention. We believe that the government should suspend gas taxes and lean on oil producers until we see some change in the prices of gas.

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