When a War Breaks Out in the Middle East and Causes

question 88

Multiple Choice

When a war breaks out in the Middle East and causes an oil shock, what makes the shock so costly to deal with?

• A) There is uncertainty on how long the war will last.
• B) The shock is unexpected.
• C) Many countries experience the shock at the same time.
• D) Agricultural productivity plummets.

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Definitions:

Binding Price Floor

A government-imposed price control or limit that sets a minimum price above the equilibrium price, leading to surplus in the market.

Price Paid

The actual amount of money exchanged for a good or service.

Supply and Demand

Fundamental economic model describing how prices and quantities of goods and services are determined in a market based on the relationship between the quantity supplied and the quantity demanded.

Price Floor

A government or regulatory minimum price set for a commodity, below which it cannot legally be sold.