If people suddenly expect that a severe drought will reduce the supply of grain, the price of grain futures will be:
A) high and then bid lower.
B) bid higher.
C) low and bid even lower.
D) bid lower.

Question

Quizplus · Accepted Answer

When people expect a reduction in supply of grain, the demand for grain futures increases, which leads to a bidding war for the available futures contracts. This bidding war results in higher prices for grain futures. Therefore, option B is the correct answer.

If People Suddenly Expect That a Severe Drought Will Reduce