The Toll of War between Russia and Ukraine

Due to the war, Ukraine hasn’t been able to supply as much oil as it used to to the US. Ukraine had announced that the Russians were targeting oil facilities to further decline the oil supply. As a result, Ukraine has not been able to export as much oil to the US, causing the prices to rise. This led to a supply shock, decreasing US GDP and increasing price levels in the short run. This situation can be explained using the Aggregate Demand/Aggregate Supply (AD/AS) model. The conflict has driven up oil prices, which are a key resource, causing the Short-Run Aggregate Supply (SRAS) curve to shift left. This shift results in a lower real GDP in the short run and increased price levels. 

With higher prices and increased costs for goods, consumers have less disposable income to spend on other goods and services. This can lead to reduced consumer spending in other areas, potentially slowing economic growth. The increased cost of living can also strain household budgets, particularly for lower-income families​. However, this doesn’t just impact consumers, but major businesses as well. Increased energy costs can reduce business profitability, leading companies to scale back investments and expansion plans.