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If the trend of Japan’s population shrinking to 96 million by 2060 continues, what might be inferred about its global economic ranking?

1. Japan will likely maintain its economic position due to advances in automation and exports.
2. Japan’s economy may contract due to a reduced labor force and declining domestic demand.
3. The shrinking population will attract foreign investment to fill labor and productivity gaps.
4. Japan will experience sustained economic growth through technological leadership.
5. The demographic trends will have minimal impact on Japan’s global economic role.

Correct answer: Japan’s economy may contract due to a reduced labor force and declining domestic demand.

Solution

A shrinking population generally reduces the labor force and domestic consumption, both of which can slow economic growth. So the most reasonable inference is that Japan’s economy may contract.

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