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Economies that rely heavily on exploitation and export of natural resources may experience the surprisingly damaging effect of large Inflows of capital. In the 1960s, a discovery of large natural gas deposits in the North Sea and subsequent Dutch ownership of natural gas resources pushed up the country's real exchange rate and ultimately caused a decline of the Netherlands' manufacturing sector in the 1970s. The term Dutch Disease was coined in reference to the negative effect of an Increase in revenues in the booming resource sector. How can too much of a good thing be bad? Read the article in the scroll box and then answer the questions that follow. UNDERSTANDING THE "DUTCH DISEASE." BY THE APLIA ECONOMICS CONTENT TEAM proceeds of exhaustible resources in human or physical capital, a country can avoid running down the stock of real wealth over time. This type of policy includes stabilization policies and sovereign wealth funds as well as trade liberalization policies that counteract excessive exchange rate appreciation. A second type of policy is aimed at improving productivity and increasing competitiveness by investing in basic research and development. The key is not to grant subsidies and protection but rather to create a healthy business environment that facilitates the discovery of profitable investment opportunities and ensures that markets remain open and competitive. In many of today's high-income countries such as Australia, Canada, Scandinavian countries, and the United States, natural resources provided the original basis of growth, after which they diversified into resource- based manufacturing and eventually into other, more knowledge-intensive industries. According to the article, which of the following statements about the Dutch Disease are correct? Check all that apply. ")When a country's currency appreciates, its manufacturing sector quickly gains competitiveness. As soon as a country's resource revenues begin to rise, the Dutch Disease is imminent. Increased demand for nontraded goods increases prices in the nontraded goods sector, which boosts the real exchange rate. The Dutch Disease can be cured by allowing manufacturing jobs to move freely to other countries.According to the article, which of the following statements about the Dutch Disease are correct? Check all that apply. ) When a country's currency appreciates, its manufacturing sector quickly gains competitiveness. As soon as a country's resource revenues begin to rise, the Dutch Disease Is Imminent. Increased demand for nontraded goods increases prices in the nontraded goods sector, which boosts the real exchange rate. The Dutch Disease can be cured by allowing manufacturing jobs to move freely to other countries. Which of the following is a characteristic of the economic model used to explain the Dutch Disease? The economy has two sectors, a booming one and a lagging one. The economy has three sectors; two sectors are booming, and one sector is lagging The economy has the nontraded goods sector, which is booming, and two lagging traded goods sectors. The economy has two traded goods sectors, one booming and the other lagging, and the nontraded goods sector