The Economic Failure of Venezuela: Dutch Disease

The video discusses the concept of Dutch disease, highlighting its impact on Venezuela's economy. It explains how the discovery of natural resources can lead to currency appreciation, making imports cheaper and exports less competitive. This situation harms local industries and redirects labor and capital to the resource sector. The video also critiques Venezuela's government for failing to diversify the economy, leading to the collapse of non-oil industries and reckless spending to mitigate unemployment.

What is a primary effect of Dutch disease on a country's economy?

• It leads to a decrease in oil exports.

• It strengthens local industries.

• It causes the currency to appreciate, making imports cheaper.

• It makes the currency weaker.

How does a stronger currency affect local industries in the context of Dutch disease?

• It increases the demand for local labor.

• It makes local goods more expensive compared to imports.

• It makes local goods more competitive globally.

• It boosts local production.

What happens to a country's exports when its currency appreciates due to Dutch disease?

• Exports become more expensive and less competitive.

• Exports become cheaper and more competitive.

• Exports increase significantly.

• Exports remain unaffected.

Which of the following strategies have some oil-rich countries used to combat Dutch disease?

• Focusing solely on oil exports.

• Increasing government spending on oil infrastructure.

• Investing in local industries and diversifying the economy.

• Reducing oil production.

What was Venezuela's approach to handling its oil wealth, according to the transcript?

• Diversifying its economy like the UAE.

• Investing heavily in local industries.

• Creating a large sovereign wealth fund like Norway.

• Recklessly spending without diversifying the economy.