Multiple choice

The enormous increase in oil-price per barrel has adversely affected commodities and markets in most countries and is largely responsible for the worldwide stock market crash. Country X, however, claimed that the severity of the stock market crash it experienced resulted from the increased import duties that had been imposed shortly before the crash.

Which of the following if it could be carried out, would most contribute to a successful evaluation of country X's claim about the cause of its stock market crash?

  1. Comparing the figures on the stock market index of country X, during the worst days of the crash, to the figures on the stock market index just prior to the crash.

  2. Evaluating the causes and consequences of the crash in country X, based on economic theory.

  3. Comparing long term effects of the crash on the purchasing power of the currency of country X to the immediate, short term effects of the crash on such purchasing power.

  4. Comparing the severity of the crash in country X to the severity of the crash in countries, otherwise economically similar to country X, that have not experienced recent hikes in import-export duties

Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

This option correctly compares the countries on the bases of “all things being equal” to identify that which is different. When size of economy is same, it would help in determining whether import duties were the culprit.