medium · GMAT Verbal Reasoning
Petrovia funnels oil revenue into a sovereign wealth fund and spends only the fund's investment returns, never the underlying capital. In every year since the fund launched, oil prices fell yet public spending held steady. Critics note that Petrovia has also passed no fiscal reform since the fund began.
Which of the following must be true based on these statements?
- The sovereign wealth fund has by now fully insulated Petrovia against absolutely any future oil-price shock the country might ever face.
- In at least one year since the fund launched, the fund's investment returns were enough to keep public spending steady despite falling oil prices.
- Petrovia would almost certainly have collapsed into financial ruin had it never established its oil-funded sovereign wealth fund in the first place.
- Fiscal reform, had Petrovia chosen to enact it, would have lowered the country's public spending by even more than the fund itself ultimately managed to.
- Oil prices will keep on falling in each of the coming years, exactly as they have fallen in every single year since the fund first launched.
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