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If there is an oil-supply disruption resulting in higher international oil prices, domestic oil prices in open-market countries such as the United States will rise as well, whether such countries import all or none of their oil.
If the statement in the passage concerning oil-supply disruptions is true, which of the following policies in an open-market nation is most likely to reduce the long-term economic impact on that nation of sharp and unexpected increases in international oil prices?
  • a)
    Maintaining the quantity of oil imported at constant yearly levels
  • b)
    Increasing the number of oil tankers in its fleet
  • c)
    Suspending diplomatic relations with major oil-producing nations
  • d)
    Decreasing oil consumption through conservation
  • e)
    Decreasing domestic production of oil
Correct answer is option 'D'. Can you explain this answer?
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If there is an oil-supply disruption resulting in higher international...
Answer:

Introduction:
The passage states that in the event of an oil-supply disruption, international oil prices will rise, leading to an increase in domestic oil prices in open-market countries. The question asks for the most effective policy to reduce the long-term economic impact of such price increases.

Explanation:
To reduce the long-term economic impact of sharp and unexpected increases in international oil prices, the most effective policy for an open-market nation is to decrease oil consumption through conservation.

Reasoning:

1. Impact of International Oil Prices:
When there is an oil-supply disruption leading to higher international oil prices, the domestic oil prices in open-market countries also rise. This increase in oil prices affects various sectors of the economy, leading to inflation, reduced consumer spending, and increased production costs. Therefore, it is essential to mitigate the economic impact of these price increases.

2. Decreasing Oil Consumption:
By reducing oil consumption through conservation measures, open-market countries can reduce their dependence on oil and mitigate the economic impact of higher oil prices. This policy helps in achieving energy efficiency, reducing the demand for oil, and diversifying the energy mix.

3. Advantages of Decreasing Oil Consumption:
Implementing policies to decrease oil consumption has several advantages:

- Energy Efficiency: Conservation measures promote the efficient use of energy resources, reducing the overall demand for oil.
- Diversification of Energy Mix: By decreasing oil consumption, open-market countries can encourage the use of alternative energy sources such as renewable energy, natural gas, or nuclear power. This diversification reduces reliance on oil and enhances energy security.
- Environmental Benefits: Decreasing oil consumption contributes to reducing greenhouse gas emissions and mitigating climate change.
- Long-term Economic Stability: By reducing dependence on oil and mitigating the impact of price increases, open-market countries can achieve long-term economic stability and reduce vulnerability to oil-supply disruptions.

Conclusion:
In conclusion, the most effective policy for an open-market nation to reduce the long-term economic impact of sharp and unexpected increases in international oil prices is to decrease oil consumption through conservation. This policy promotes energy efficiency, diversifies the energy mix, and contributes to long-term economic stability.
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If there is an oil-supply disruption resulting in higher international...
Let's go through each answer choice and evaluate its potential effectiveness:
(A) Maintaining the quantity of oil imported at constant yearly levels: This option suggests keeping the oil import levels constant regardless of the price increase. While it may provide some stability in the short term, it does not address the underlying issue of high oil prices and may not be the most effective long-term solution.
(B) Increasing the number of oil tankers in its fleet: Increasing the number of oil tankers may help in terms of transportation logistics, but it does not directly address the economic impact of higher oil prices. It is unlikely to be the most effective solution in reducing the long-term economic impact.
(C) Suspending diplomatic relations with major oil-producing nations: Suspending diplomatic relations with major oil-producing nations may lead to political consequences and potential disruption in the oil supply chain. It is unlikely to be an effective long-term solution for reducing the economic impact of higher oil prices.
(D) Decreasing oil consumption through conservation: This option focuses on decreasing oil consumption through conservation measures. By promoting energy efficiency, developing alternative energy sources, and reducing dependence on oil, a country can lower its vulnerability to oil price shocks. This option aligns with the goal of reducing the long-term economic impact and is the most likely effective solution.
(E) Decreasing domestic production of oil: Decreasing domestic oil production might reduce the reliance on oil as an energy source but may not directly address the issue of higher oil prices. It could also have adverse effects on domestic employment and energy security. Therefore, it is less likely to be the most effective long-term solution.
In summary, option (D) - Decreasing oil consumption through conservation - is the most likely policy to reduce the long-term economic impact on an open-market nation of sharp and unexpected increases in international oil prices.
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If there is an oil-supply disruption resulting in higher international oil prices, domestic oil prices in open-market countries such as the United States will rise as well, whether such countries import all or none of their oil.If the statement in the passage concerning oil-supply disruptions is true, which of the following policies in an open-market nation is most likely to reduce the long-term economic impact on that nation of sharp and unexpected increases in international oil prices?a)Maintaining the quantity of oil imported at constant yearly levelsb)Increasing the number of oil tankers in its fleetc)Suspending diplomatic relations with major oil-producing nationsd)Decreasing oil consumption through conservatione)Decreasing domestic production of oilCorrect answer is option 'D'. Can you explain this answer?
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If there is an oil-supply disruption resulting in higher international oil prices, domestic oil prices in open-market countries such as the United States will rise as well, whether such countries import all or none of their oil.If the statement in the passage concerning oil-supply disruptions is true, which of the following policies in an open-market nation is most likely to reduce the long-term economic impact on that nation of sharp and unexpected increases in international oil prices?a)Maintaining the quantity of oil imported at constant yearly levelsb)Increasing the number of oil tankers in its fleetc)Suspending diplomatic relations with major oil-producing nationsd)Decreasing oil consumption through conservatione)Decreasing domestic production of oilCorrect answer is option 'D'. Can you explain this answer? for GMAT 2025 is part of GMAT preparation. The Question and answers have been prepared according to the GMAT exam syllabus. Information about If there is an oil-supply disruption resulting in higher international oil prices, domestic oil prices in open-market countries such as the United States will rise as well, whether such countries import all or none of their oil.If the statement in the passage concerning oil-supply disruptions is true, which of the following policies in an open-market nation is most likely to reduce the long-term economic impact on that nation of sharp and unexpected increases in international oil prices?a)Maintaining the quantity of oil imported at constant yearly levelsb)Increasing the number of oil tankers in its fleetc)Suspending diplomatic relations with major oil-producing nationsd)Decreasing oil consumption through conservatione)Decreasing domestic production of oilCorrect answer is option 'D'. Can you explain this answer? covers all topics & solutions for GMAT 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for If there is an oil-supply disruption resulting in higher international oil prices, domestic oil prices in open-market countries such as the United States will rise as well, whether such countries import all or none of their oil.If the statement in the passage concerning oil-supply disruptions is true, which of the following policies in an open-market nation is most likely to reduce the long-term economic impact on that nation of sharp and unexpected increases in international oil prices?a)Maintaining the quantity of oil imported at constant yearly levelsb)Increasing the number of oil tankers in its fleetc)Suspending diplomatic relations with major oil-producing nationsd)Decreasing oil consumption through conservatione)Decreasing domestic production of oilCorrect answer is option 'D'. Can you explain this answer?.
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