ECONOMICS
BALANCE OF PAYMENTS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A definitely favourable, as Bolivia could increase its exports of gas and oil
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B definitely unfavourable, as the foreign companies would transfer profits out of the country
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C uncertain, as there would be inflows and outflows of currency
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D zero, as Bolivia itself would use the gas and oil produced
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Detailed explanation-1: -Growth concerns: With increasing crude oil prices, inflation will increase, and to control inflation, the RBI will have to increase the interest rate. It will lead to lower spending, and hence the country’s growth will come down.
Detailed explanation-2: -What affects the price of oil? The price of oil fluctuates according to three main factors: current supply, future supply, and expected global demand. Members of OPEC control 40% of the world’s oil.
Detailed explanation-3: -Higher Inflation There will also be a significant impact on the consumer price index (CPI) and the rate of inflation in terms of CPI may be at 5 per cent in FY23 due to the rise in oil price. Thus, if the price of oil goes up by 10 per cent, the price of the goods in India will be up by 5 per cent.
Detailed explanation-4: -In the long run, sustained oil price hikes can slow down the growth of an economy. Like an ordinary Filipino household, the Philippine economy, in general, is also up for a rough ride. Production, transportation, and manufacturing costs are also driven up by high oil prices.