Passage: [Reference to Resource Curse text above]
What is the primary mechanism of 'Dutch Disease' as described in the passage?
Answer and explanation
Correct answer: C. Resource exports appreciate the domestic currency
- Step 1: Locate the term 'Dutch Disease' in the passage: it is introduced as a major driver of the resource curse.
- Step 2: Identify the explicit definition provided: the passage defines Dutch Disease as currency overvaluation that renders domestic manufacturing uncompetitive.
- Step 3: Thus, the primary mechanism is that resource exports appreciate the domestic currency, hurting the competitiveness of domestic manufacturing.
Answer
Resource exports appreciate the domestic currency.
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