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HIGHERCOLLEGE OF TECHNOLOGY

DEPARTMENT: BUSINESS STUDIES

Final Examination:

Assignment Based Assessment

Semester: II A. Y.: 2019 / 2020

Diploma I and II Year

Start Date: 29/5/2020 Time: 2:00 PM

Due Date: 31/5/2020 Time: 2:00 PM

Student Name

Student ID

Specialization

Section

Level Diploma Second Year

Course Name Principles of Macroeconomics

Course Code BAEC2204

For official Use Only

Question No. Max. Marks Obtained

Marks

Question No. Max.

Marks

Obtained

Marks

1 5 1 5

2 5 2 5

3 5 3 5

4 5 4 5

5 5 5 5

6 5 6 5

7 5 7 5

8 5 8 5

9 5 9 5

10 5 10 5

Grand Total

Marks 50 50

First Marker: Second Marker:

Date: Date:

Guidelines for Students to Submit the Assignment:

1) The final assessment for semester 2, 2019-20 will be done through comprehensive

assignment for a maximum of 50 marks. The schedule of the final assessment is

available in the college website. https://www.hct.edu.om/about/the-

college/announcements/final-assessment-timetable-041620

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date of submission deadline.

Section A

Important: - Each answer should have minimum 100 words, if data or table used to support

your answer, must give proper reference

Only upload answer with question number in MS word, please don’t copy any question, case,

instruction or any other information

Read the given information and answer the questions.

Regardless of the cause, low oil prices are hitting Oman hard. A massive 77 percent of the

country's budget comes from oil revenue. As far back as 1990, Oman's leaders discussed the

importance of diversifying the economy to become less dependent on oil. Yet today the country

has almost no manufacturing or agricultural production.

Tawfeeq al Lawati, a member of the executive committee of Oman's Shura Council or lower

house of parliament, says the country plans to develop manufacturing, transportation and tourism

A first step is to develop refineries to process oil into diesel and other petrochemicals. "We have

a business plan," he said. "Rather than exporting an oil barrel for 100 dollars, adding value to it

by refining it and having different derivatives, which could also lead to different chemical

products." The government is also building a huge, modern port in Duqm, on Oman's central

coast. Currently, ships exporting oil from Iran or Iraq must pass through the Straits of Hormuz.

Ships carrying manufactured goods traverse the Straits in the other direction. In recent years,

wars and political instability have closed the Straits. Al Lawati says the Duqm port could become

an alternative shipping route.

Oil producers could store their product in Duqm and then load it onto modern tankers. Other

ships could offload in Duqm and transport their goods by land to the nearby countries of the Gulf

Cooperation Council, or GCC, such as United Arab Emirates or Qatar. "Oman could become a

main logistics hub for the region," said al Lawati. "The government is upgrading the

infrastructure, the transportation, even the introduction of the railway and linking it with the

GCC." Still, similar plans for economic development have been discussed in Oman for years. It

remains to be seen whether they will be put into action.

https://www.dw.com/en/continuing-low-oil-prices-cause-crisis-in-oman/a-18584787

1. Why government needs to reduce its dependence on oil industry? What steps are taken

by Oman’s government to reduce its dependency on Oil Industry? [2.5+2.5= 5 Marks]

______________________________________________________________________________

2. What is the impact of oil industry on the employment of labor force over last 4 years?

What percentage of the total labor force is employed by the oil industry and what kind of

unemployment has been created due to such situation?

[2 +1+2=5 Marks]

______________________________________________________________________________

3. "We have a business plan," Mr. AL Lawati said. "Rather than exporting an oil barrel

for 100 dollars, adding value to it by refining it and having different derivatives, which

could also lead to different chemical products." To implement this business plan, it

requires huge investments; describe the impact on income of the country with the

multiplier effects in this scenario. [definition of term 2+ relating concepts to situation 3= 5

Marks]

______________________________________________________________________________

Section B

Important: - Each answer should have minimum 100 words, if data or table used to support

your answer, must give proper reference

Read the data given below and answer the question

Source:- researchgate.net

4. Relate Real GDP with inflation rate, percentage change in GDP and percentage change

in inflation is low, what does it indicate. Explain the relation for all the four years [2+3=5

Marks]

______________________________________________________________________________

5. As per the table, explain which year is having most stable economic growth, describe

after evaluating all measureable tools. [1+4=5 Marks]

______________________________________________________________________________

Section C

Important: - Each answer should have minimum 100 words, if data or table used to support

your answer, must give proper reference

Read the article carefully and answer the question given below

Of all the GCC nations, Oman is the most worrying from a fiscal and financial perspective. Ever

since the collapse in global oil prices from their highs above $100 a barrel in 2014, the country

has maintained a consistent fiscal deficit. This has resulted in a dramatic rise in the government

debt to GDP ratio from just 5 per cent to around 60 per cent.

At the heart of the problem is the sultanate’s heavy reliance on oil receipts and its limited non-oil

and private sector diversification despite its low volume of oil output and relatively large

population. None of this stands it in good stead in the face of low prices.

Oman’s debt is nevertheless manageable, and pales in comparison to the debt levels in many

mature economies. But Muscat has so far been unable to tackle the underlying causes of its fiscal

imbalance, and in 2020 is projected to backslide on recent progress with a widening of the fiscal

deficit to -8.4 per cent, from -6.7 per cent in 2019.

In its ability to tap foreign capital, Oman’s junk-grade sovereign creditworthiness places it in a

not dissimilar position to Bahrain. The difference is that the government in Manama is much

better positioned to call upon its neighbours for emergency financial support, whereas Muscat

needs to find its own way out of its predicament.

One answer may be its ongoing investment in upstream gas projects, as the market for gas enjoys

a more positive forecast than the market for oil.

The country’s bullish renewable energy programme may be another, as this will bring down the

cost of producing energy and reduce the use of otherwise exportable gas. Plans for an energy

spot market could further encourage this growing industry.

The logistics sector also remains a key strategic imperative for the country, although

infrastructure remains a work in progress. The country’s ports and free zones still needs clients

and it is still too early to tell how recent bilateral deals with the Chinese will turn out.

There is undoubtedly a great deal of potential in Oman, but Muscat needs to face its fiscal

challenges head on for growth to prevail.

Source: - https://www.meed.com/omans-economy-at-glance

6. As per the case a dramatic rise in the government debt to GDP ratio from just 5 per cent

to around 60 per cent. What is government debt and how does it affects the economic

development? This dramatic rise in the debt is good or bad for the economy. Justify your

answer. [2+2+1= 5 Marks]

______________________________________________________________________________

https://www.meed.com/omans-economy-at-glance

______________________________________________________________________________

7. According to the article there is bullish investment in the renewable energy program,

explain what will be effect on consumer spending and aggregate supply.

[2.5+2.5=5 5 Marks]

______________________________________________________________________________

8. Explain the role of central bank in such scenario to minimize the fiscal deficit. Explain

the steps to be taken by central bank to control fiscal losses. [2+3=5 Marks]

______________________________________________________________________________

Section D

Important: - Each answer should have minimum 100 words, if data or table used to support

your answer, must give proper reference

Read the following article and answer the questions given below.

The Sultanate of Oman is classified as a high-income country and is one of the most developed

and stable countries of the Arab world. Oman has been a member of the WTO since 2000,

alongside membership of the Gulf Cooperation Council (GCC) which have been the key factors

shaping Omani trade policy. This has included reviewing and amending trade policy in areas

such as: contingency trade remedies, government procurement, commercial companies, and

investment. Oman is also a member of the Greater Arab Free Trade Area and has a bilateral trade

agreement with the United States, which entered into force in 2009. 79 % of Oman’s exports are

Fuels and Mining Products, followed by 10% Manufacture and 2 % Agriculture.

Apart from a few exceptions, good produced in the Gulf Cooperation Council member countries

enter duty free if accompanied by certificates of origin. The government’s long-run development

strategy is the “Oman Vision 2020”, which is designed to strengthen the economy beyond the

depletion of oil reserves. Oil and gas development remains a priority, but the government is also

pushing ahead with its economic diversification program.

http://www.intracen.org/country/oman/

9. As stated in the article “The Sultanate of Oman is classified as a high-income country

and is one of the most developed and stable countries of the Arab world, “what factors

make Oman stable and high income country. Explain your answer with indicators which

justifies this statement. [2+3=5 Marks]

______________________________________________________________________________

http://www.intracen.org/country/oman/

______________________________________________________________________________

10. One of major steps taken by Oman government is to keep its currency pegged against

USD. In what way it helps the government in maintaining its Balance of Payment. Explain

the Balance of Payment situation in Oman. [3+2= 5 Marks]

______________________________________________________________________________