Suppose That Speculators Expect That a War in the Middle

question 157

Essay

Suppose that speculators expect that a war in the Middle East is likely next year, which could cause a significant decrease in the supply of oil.
a. What could the speculators do to profit from their expectation?
b. What would be the possible impact of the war on the oil market without speculation?
c. What would be the possible impact of the war on the oil market with the action taken by the speculators described in part a?
d. How would the action taken by the speculators impact society?

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Definitions:

Literary Digest

A general interest magazine in the United States that published from 1890 to 1938, known for its failed prediction of the 1936 presidential election.

Probability Sampling

A method of sampling that utilizes random selection procedures to ensure every member of a population has an equal chance of being included in the sample.

Margin Of Error

A measure in survey research, indicating the range within which the true value (for example, percentage of population holding a certain opinion) lies with a certain level of confidence.

Percentage Points

A unit for the difference of percentages, referring to the absolute difference between values in percentage terms, not the relative difference.