[question removed by moderator]
answer is A. i get that the above situation described does not describe the dutch disease. is there a name in the curriculum for what it describes then? I.e. the situation where “As demand from the tire factory drives up the price of rubber, capital flows out of the country and the local currency could depreciate rapidly”
What it describes is non-sense… There wont be a name for it. That’s like me descibing random stuff for French FAMA model and having the answer chocies say what is most likely incorrect about what I described…
lol that topic test question was written in literally the most confusing way possible and brings in all sorts of different concepts. So…
dutch disease is when rapid capital inflows (because you have some sort of valuable resource) appreciate your currency so rapidly that youre unable to export much of your manufactured products from other industries anymore because theyre now too expensive. There is no name for a currency depreciating when this happens. It was there to throw you off.
CFAI seems to want to stress in this section that simply having natural resources doesnt mean that you’ll benefit from them. it’s more important to have access to these resources and a good system to take advantage of them.