CRUDE OIL PRICE SHOCKS AND GROSS DOMESTIC PRODUCT
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This study uses ordinary least squares estimation to test multivariate models in order to find out whether or not crude oil price shocks are contractionary and negatively impact the macroeconomy. Variables are annual and pertain to different aspects of crude oil and how they affect real gross domestic product (GDP). It is predicted that increases in domestic and imported crude oil prices negatively affect real GDP by decreasing not only energy consumption but the consumption of other goods and services as well. It is found that the initial hypothesis is partially correct. While increases in imported oil prices do decrease real GDP, increases in domestic oil prices actually increase real GDP. Additionally, as predicted, consumption other than energy is affected by crude oil price shocks and causes real GDP to contract.