The New Democratic Party in Canada is concerned that the Canadian oil boom has increased the exchange rate, thereby harming the manufacturing sector by making it less competitive in international markets. This concern highlights the notion of _____ and can best be studied by using _____ analysis.

Question

Quizplus · Accepted Answer

Dutch disease refers to the negative impact on an economy of anything that gives rise to a sharp inflow of foreign currency, such as the discovery of large oil reserves. The condition leads to increased exchange rates which can harm other sectors like manufacturing by making them less competitive internationally. General equilibrium analysis is best suited to study such economy-wide issues because it considers the interrelations between various sectors of the economy, unlike partial equilibrium analysis which focuses on one market in isolation.

The New Democratic Party in Canada Is Concerned That the Canadian