Question

Almora, a developing open economy, is experiencing an economic boom since it discovered oil reserves off its coast two years ago. Bill Hudson, an economist with the Finance Ministry of Almora, said in an interview that the oil boom has improved the average standard of living in the economy. Robin Peters is an industry analyst who does not agree with Hudson's view. In one of his recent articles in the country's leading business daily, Robin claimed that the high rate of inflation following the boom has actually weakened the expansionary impact on the economy.Which of the following, if true, will support Robin's argument?A.Employment in the country's oil industry reported an annual growth of 15 percent this year.B.The construction sector has expanded by 20 percent in the last two years.C.Almora reduced its petroleum imports this year.D.Almora's agriculture and manufacturing sectors have become less competitive in the world market.E.The government of Almora is expected to have a budget surplus of $2 billion in the current financial year.

Answer 1

Answer:D. Almora agriculture and manufacturing sectors have become less competitive in the world market.

Explanation:

In increased standard of living means the populace can afford more essential commodities, an expansionary economy means more investment which has lead to more employment. An inflation is the continuous rise in price of goods and services which is as a result of large volume of money in circulation used in exchange for the few available goods and services.

In the above scenario the huge revenue from the oil boom as surpassed the agriculture and manufacturing outputs and this has lead to increase in price and hitherto a fall in demand and which have made them less competitive.

The increase in employment in the oil industry and expansion of the construction industry are positive development. The surplus budget means goverments expected revenue is greater than is expenditures, this will invariably increase savings and threafter investment.