OPEC's oil embargo of Canada in the 1970s was an example of
A)a demand shock that increased price levels.
B)a demand shock that decreased price levels.
C)a supply shock that increased price levels.
D)a supply shock that decreased price levels.

Question

Quizplus · Accepted Answer

The oil embargo by OPEC on Canada was a supply shock, as it reduced the supply of oil to Canada. This reduction in supply led to an increase in the price of oil, as there was now a scarcity of it in the market. Therefore, the correct choice is C, a supply shock that increased price levels.

OPEC's Oil Embargo of Canada in the 1970s Was an Example