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: -oil crisis, a sudden rise in the price of oil that is often accompanied by decreased supply. Since oil provides the main source of energy for advanced industrial economies, an oil crisis can endanger economic and political stability throughout the global economy.
Detailed explanation-4: -Rise in crude oil prices can be worrisome for markets and investors. It means higher transport costs of goods and a rise in input costs for most industries. When the price of oil rises, it can propel inflation, and to tame it, central banks across the globe may hike key rates, making borrowing an expensive proposition.