The Economy of Bhutan

Which scenario best illustrates Bhutan’s mixed economy?

• A monastery growing vegetables for monks

• A private company investing in hydropower under government regulation

• A government school providing free education

• A foreign investor running a hotel without restrictions

Bhutan is highly dependent on hydropower. What is the most significant risk of this reliance?

• Higher cost of production

• Decreased foreign investments

• Revenue fluctuation due to seasonal water levels

• Increased urban migration

If the demonstration effect continues to influence consumer behavior, what long-term economic consequence is most likely?

• Increase in export earnings

• Higher capital formation

• Balanced trade

• Decline in national savings rate

Despite a growing GDP per capita, poverty still exists in Bhutan. What could explain this paradox?

• GDP per capita is not linked to real income

• Income inequality and uneven wealth distribution

• GDP includes foreign aid

• GDP does not include the private sector

Which policy would most effectively address Bhutan’s youth unemployment problem?

• Increase retirement age

• Expand CSIs and skill development programs

• Increase imports of foreign products

• Limit tourism growth

Which action by a Bhutanese household best demonstrates the link between savings and investment?

• Buying a new car

• Depositing income in a fixed savings scheme to start a small business later

• Spending salary on imported goods

• Donating money to a monastery

Which combination best reflects a strategy to increase capital formation in Bhutan?

• Increase imports, reduce taxes

• Increase social spending, reduce consumption

• Promote savings culture and provide better investment options

• Expand government subsidies, increase wages

Which of the following best explains why economic diversification is critical for Bhutan?

• To reduce tax burden

• To increase dependency on tourism

• To stabilize the economy during sector-specific shocks

• To improve traditional farming

What would be the likely impact on Bhutan’s GDP if the tertiary sector faces a decline due to global tourism shocks?

• GDP remains unaffected

• Primary sector will compensate

• Overall GDP will decrease significantly

• Per capita income will rise

Why might encouraging CSIs be a more sustainable strategy for Bhutan compared to large-scale industries?

• CSIs have no competition

• They rely more on foreign aid

• They promote local employment and preserve culture

• They can replace hydropower