Micheal Roemer's three-sector model shows that growth in the booming export sector I- reduces the price of foreign exchange II- retards other sectors' growth by reducing incentives to export other commodities III- reduces incentives to replace domestic goods for imports IV- raises factor and input prices for non-booming sectors ?
Correct answer: D. I, II , III only IV
- A. I and III only
- B. II and III only
- C. I, II and III only
- D. I, II , III only IV
Explanation
A booming export sector can appreciate the currency, weaken other export and import-substitution sectors, and bid up factor and input prices, producing Dutch-disease effects. Thus statements I, II, III, and IV are all included, despite the option's awkward wording.
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