Answer to Question #208569 in Macroeconomics for REINBLESS

Question

Explain the term 'Dutch Disease' Use it to advise the policy makers of your country in the light of the recent discovery and production of oil in a country.

Answer 1

Dutch disease is a concept that explains that accelerated development sector can lead to a decline in the other sectors ignored. The over-reliance on one sector can lead to imbalanced growth in the economy. For example, recent discovery and production of oil in a country like Ghana can lead to imbalanced growth if all attention is on the oil. Therefore, policymakers should invest in other sectors like public transportation to ensure equal growth in the economy. They should also invest in oil compliments like agriculture to ensure there is equal economic growth. Lastly, the policymakers should formulate laws and policies to ensure good governance, transparency, and management of development sectors in the economy.