ABSTRACT
This chapter examines the impact of rising energy prices on specific aspects of the living standard of low and lower middle income Americans -- household energy costs, the rental housing market, and the delivery of local public services. The relative incomes of lower income households could not adjust rapidly and easily in a depressed economy. The behavior of specific elements of the economy also conforms to the predictions of macroeconomic theory. Rising energy prices have a tendency to reduce aggregate demand and, therefore, to reduce economic activity. This is particularly true in the short run because it is difficult to find substitutes for energy in many economic activities. There are a host of econometric models for analyzing the general behavior of the economy which have been used to estimate the impact of rising energy prices on economic activity. Judging the actual significance of the negative economic impacts can be a matter of perspective.
