Question #32
Reading: Reading 6 Economic Growth
PDF File: Reading 6 Economic Growth.pdf
Page: 15
Status: Unattempted
Correct Answer: B
Question
A country with relatively poor endowment of natural resources is most likely to:
Answer Choices:
A. enjoy the technological progress of a country with a vigorous manufacturing sector
B. suffer from ‘Dutch disease’
C. devote a disproportionate amount of its economic energy to pursuing the limited natural resources that the country has
Explanation
Countries with poor endowments of natural resources may enjoy relatively high levels of
GDP growth rate as long as they have access to natural resources. Dutch disease refers to
situation where a country with large endowments of natural resources finds its currency
appreciating driven by foreign demand for those resources. This increase in currency
value may render other domestic industries uncompetitive globally, and the country may
not participate in the TFP progress seen in countries with strong manufacturing sectors.
Countries with abundant natural resources may devote disproportionate amount of its
economic energy in pursuing those resource industries at the expense of other industries.