Low-income nations with poor credit ratings are often dependent on commodity sales as a major portion of income. To insure against the effects of a fall in the prices of commodities, the nation could:
A) borrow internationally.
B) save as a precaution and purchase sovereign wealth funds with that money.
C) ask for debt reduction and forgiveness.
D) enter into a cartel to boost the prices of commodities.

Question

Quizplus · Accepted Answer

Saving as a precaution and purchasing sovereign wealth funds with that money can provide the low-income nation with a buffer to mitigate the impact of a fall in commodity prices. This strategy also avoids the risks associated with borrowing internationally or entering into a commodity cartel. Asking for debt reduction and forgiveness may not always be a viable option, and entering a commodity cartel may not be legal or feasible for all commodities.

Low-Income Nations with Poor Credit Ratings Are Often Dependent on Commodity