Why is it important for countries to diversify their economies?
A.One-resource economies ensure countries are well diversified.
B.One-resource economies protect a country from hazards of competition.
C.One-resource economies are vulnerable to outside factors that can leave the country with few or no sources of income.
D.One-resource economies leave the country with many varieties and sources of income.
So, in order to solve this question, first rule out the 100% in-correct numbers.
First of all, A makes no sense, so that one is wrong. B is not correct, although the answer is the opposite of B.
That leaves C or D.
Which makes more sense?
hm.. id say C..?
The correct answer is C. One-resource economies are vulnerable to outside factors that can leave the country with few or no sources of income.
Diversifying an economy refers to reducing dependence on a single industry or resource and developing multiple sectors or sources of income. It is essential for countries to diversify their economies for several reasons.
First, relying heavily on a single industry or resource can make a country vulnerable to external shocks or changes in market conditions. For example, if a country's economy is primarily dependent on oil, a sudden drop in oil prices can significantly impact its economy and lead to a sharp decline in revenue. Diversification helps cushion the impact of such shocks as it allows a country to rely on other sectors for income.
Second, diversification promotes economic stability. When an economy is diversified, it is less prone to boom-and-bust cycles that can occur in single-resource economies. This stability is beneficial for long-term economic growth and prevents excessive reliance on a volatile sector.
Third, diversification creates job opportunities. Developing multiple industries and sectors stimulates employment growth as different sectors require a diverse range of skills. This helps reduce unemployment rates and contributes to overall economic development.
To understand the importance of diversifying economies, one can look at historical examples of countries heavily reliant on a single resource facing economic hardships due to external factors. These cases demonstrate why diversification is crucial for a country's economic resilience and sustainability.
In summary, diversifying an economy reduces vulnerability to external factors, promotes stability and resilience, creates job opportunities, and contributes to sustainable economic development.