An oil price shock will probably increase the size of an oil-centered city like Houston, Texas....
An oil price shock will probably increase the size of an oil-centered city like Houston, Texas. During the time that people are moving to Houston, looking for jobs, and switching jobs to find the best job possible, do you think GDP will be lower than usual or higher than usual?
Homework Answers
It shall be noted that as indicated in the question, the oil price shock is favorable for the economy of oil-centred city like Houston , Texas, indicating that Houston and Texas would provide for the greater avenues for jobs and that the city would increase the supply of oil.
People would initiate migration to Houston and look for newly generated jobs and may even find the best job in terms of increased salary and perks.
However, the GDP is estimated that of economy and not at the city level.
If there happens to be no impact of rising price on other parts of US economy , then increased migration and increased supply of oil would increase the GDP
Hence, GDP will be higher than usual. This is because of increased production of oil, increased transporation costs incurred by migrants and increased switching-cost for jobs. Increased circulation of money would means greater economic activity and hence, greater GDP.
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