As compared to previous occasions, this year's rise in oil p...

READ TEXT II AND ANSWER QUESTIONS 26 TO 30:

TEXT II

COUNTING THE COST
Aug 25th, 2005

Can the world economy continue to shrug off high oil
prices?

HAD you been told in late 2001-not long after that
September's terrorist attacks, and when stockmarkets had
been tumbling for 18 months or so-that the price of crude
oil would more than triple within four years, you might well
have predicted global economic meltdown. The price of a
barrel of West Texas Intermediate has risen from $18 in
November 2001 to record levels: it hit yet another new
high, above $67, this week. This is similar in scale to the
price jumps of 1973-74, 1978-80 and 1989-90, all of which
were followed by worldwide recession and rising inflation.
Today, though, global GDP growth is well above trend, while
inflation remains low. Why has the world economy fared
so comfortably this time?
There are several popular explanations. The simplest is that,
although the latest price increase is about as big as those in
previous episodes, it has been more gradual. In 1979 the
price of oil doubled in six months; this time it took 18 months,
giving households and firms more time to adjust and so doing
less damage to their confidence and finances and hence to
economic activity. This is plausible, but unlikely to be the
whole story: no matter what the pace of the increase, it
pains Americans to pay $3-plus for a gallon of petrol.

(www.economist.com/finance)