Chapter 19, Problem 16AA

To determine

To explain: The dangerous situations that can be faced by a country if it relies heavily for income from only a few products.

Explanation of Solution

Obstacles to economic growth: An economy cannot grow properly if it faces certain obstacles. These obstacles include the attitudes and beliefs of people, misuse of resources, and rapid growth in population and trade restrictions. These obstacles are faced by developing countries and this problem is solved by injecting capital into the economy.

When a nation relies too heavily on income from just a few products, it is considered dangerous for the economy. This is because when those products or industries related to those few products fall, the economy has to see a major downfall.

An example of this is when Indonesia relied on few products for its economy. The oil glut in the 1980s caused deep problems for the economy of the country. Trade income was affected a lot, an economic crisis hit the country and riots were started.