Reading Practice for International Exams: Economic Impact of Conflict

Ace Your Reading Test: The Economic Impact of Conflict

Welcome to your reading practice session! On international exams, you’ll need to read complex texts quickly and accurately. The key isn’t to understand every single word, but to grasp the main ideas, find specific information, and understand the author’s purpose.

Before you start reading, skim the passage for 30-60 seconds. Just read the first sentence of each paragraph to get a general idea of the topic and structure. As you read more carefully, scan the text for keywords from the questions to locate answers efficiently. This exercise is designed to be challenging. Try to read the passage and answer all 10 questions in under 20 minutes to practice the time management skills you’ll need on test day. Let’s begin!

Reading Passage

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The eruption of international conflict is most often analyzed through the lenses of political science and human suffering. While the geopolitical ramifications and the tragic human cost are indeed paramount, the economic consequences are equally profound and far-reaching, often extending beyond the immediate belligerents to destabilize the global economy. These impacts can be broadly categorized into direct costs, such as the destruction of infrastructure and military expenditure, and indirect costs, which include disruptions to trade, investor uncertainty, and long-term fiscal pressures.

The direct economic costs are the most visible and immediately quantifiable. Military campaigns are colossally expensive undertakings. National budgets are diverted from productive sectors like education and healthcare to fund armaments, logistics, and personnel. For the nation under attack, the costs are magnified by the systematic destruction of physical capital. Factories, bridges, power plants, and residential areas—assets that form the productive backbone of a modern economy—can be decimated, setting a country’s development back by decades. This obliteration of infrastructure not only halts current economic activity but also imposes a staggering future liability in the form of reconstruction costs, which often requires substantial international aid and loans, leading to long-term debt.

Beyond these immediate costs, the indirect impacts of conflict ripple outward, often in insidious ways. International trade, the lifeblood of the modern globalized world, is a primary casualty. Supply chains are severed, shipping routes become perilous, and insurance premiums for transport skyrocket. A localized conflict can, for example, disrupt the global supply of a critical commodity, whether it be oil, grain, or a specific mineral needed for manufacturing electronics. This supply shock inevitably leads to price hikes and inflation across the world. Furthermore, nations often wield economic tools as weapons. The imposition of sanctions—penalties levied by one country or a coalition of countries on another—is designed to cripple a belligerent’s economy. While intended to be targeted, sanctions often have a boomerang effect, causing economic pain for the countries that impose them by closing off markets and disrupting financial flows.

Perhaps the most pervasive indirect cost is the erosion of confidence. Capital is notoriously timid; it flees from uncertainty and risk. The outbreak of a major conflict triggers massive capital flight from the affected region and can cause significant volatility in global financial markets. Investors become risk-averse, stock markets tumble, and planned foreign direct investments are shelved. This creates a credit crunch, making it harder for businesses globally to secure loans for expansion. This climate of fear stifles innovation and long-term investment, favoring short-term, safe-haven assets.

Finally, the long-term fiscal burden on both the involved nations and the international community is immense. Countries that engage in prolonged conflicts often finance their efforts through debt, leading to crippling national deficits and future austerity measures. For the international community, the costs of humanitarian aid, refugee support, and peacekeeping missions represent a significant and ongoing financial commitment. In essence, war is the antithesis of economic prosperity; it is an exercise in destruction that mortgages the future to pay for the conflicts of the present.

Reading Quiz

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Keywords & Phrases

1. Belligerents: (noun) This is a formal word for the nations, groups, or people engaged in a war or conflict. We used it to say that the economic effects go “beyond the immediate belligerents.”
2. Ramifications: (noun) This word means the complex or unwelcome consequences of an action or event. We used it to talk about the “geopolitical ramifications” of war, meaning the wide-ranging political consequences.
3. Quantifiable: (adjective) If something is quantifiable, it means you can measure it and express it as a number. We used it to describe the “immediately quantifiable” direct costs of war, like the monetary value of a destroyed bridge.
4. Insidious: (adjective) This describes something that proceeds in a gradual, subtle way, but with very harmful effects. We said the indirect impacts of war ripple outward in “insidious ways” because they aren’t always obvious at first but are very damaging.
5. Supply shock: (phrase) In economics, this is an unexpected event that suddenly changes the supply of a product or commodity, resulting in a sudden change in its price. We used it to describe what happens when a conflict disrupts the flow of a critical resource like oil.
6. Boomerang effect: (idiom) This refers to a situation where an action has the unintended consequence of hurting the person who initiated it. We used it to explain how imposing sanctions can backfire and cause “economic pain for the countries that impose them.”
7. Pervasive: (adjective) This means spreading widely throughout an area or a group of people. We described the erosion of confidence as the most “pervasive indirect cost” because it affects almost everyone and every part of the global economy.
8. Capital flight: (phrase) This is an economic term for when money and assets rapidly flow out of a country due to an event of economic or political consequence. We used it to describe how investors pull their money out of a region when a conflict breaks out.
9. Austerity measures: (phrase) These are official government policies aimed at reducing government budget deficits through spending cuts, tax increases, or a combination of both. We mentioned that countries might need “future austerity measures” to pay off the massive debt they accumulate during a war.
10. Antithesis: (noun) This means a person or thing that is the direct opposite of someone or something else. We used it in the powerful concluding sentence: “war is the antithesis of economic prosperity.”