Here is an economics forecasting riddle:
In 2007 Ghana discovered massive amounts of crude oil about 20 miles off of the coast. It is estimated that it will bring over $1 Billion of revenue to the Ghana government. The crude oil will be primarily exported. Also, Ghana will own the entire field, except for a 25% stake sold to ExxonMobil so that the mining process goes efficiently and smoothly.
Here is the question: First, if Ghana EXPORTS a lot of crude oil what will happen to Ghana's currency? Will it increase or decrease?
Second, what ramifications will the change in Ghana's currency have on the rest of Ghana's economy?
More specifically, think about the different sectors of an economy (Government expenditure, investment, consumption, and export/import). Which sectors are affected more than the others? Could the rise in Ghana's currency have dangerous implications for any one sector in general?
For more information, research Dutch Disease... which is neither Dutch nor a disease!
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Hmmmm, what disease would one pick up in Amsterdam? Tough one, there are so many after all.
ReplyDeleteI was reading up on this and some people think it's a myth, or at least they counter by saying it's actually a Nigerian disease. This is where the economy is stunted by having too many natural resources because the government gets too corrupt to sustain a normal industrialized economy.