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Compute the world price of crude oil

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Question: Country N, a relatively small, impoverished country, discovers a huge reservoir of crude oil, for which the costs of lifting are less than 10% of the market price. Explain what happens to

(a) the growth rate,

(b) the value of the currency, assuming it is allowed to float freely,

(c) the trade balance,

(d) the rate of inflation. Now assume that 10 years after this initial discovery, the world price of crude oil suddenly drops by half. How do your answers to (a)-(d) change?

Reference no: EM131737605

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