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Answer: A higher dependence on a single commodity makes a country's overall economy more vulnerable to changes in demand or prices of that commodity.
## Explanation **A is correct** because a higher dependence on a single commodity indeed makes a country's economy more vulnerable to changes in demand or prices of that commodity. This creates economic instability and increases country risk. **B is incorrect** because a legal system that provides for lawsuits against firms and their management actually lowers country risk by giving investors recourse in cases of fraud, insider trading, or other harmful actions. **C is incorrect** because firms do NOT want to invest in countries with biased legal systems or government interference, as this increases legal and operational risks. **D is incorrect** because declining credit spreads actually signal credit quality improvement, not deterioration.
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A higher dependence on a single commodity makes a country's overall economy more vulnerable to changes in demand or prices of that commodity. Which of the following statements about country risk is correct?
A
A higher dependence on a single commodity makes a country's overall economy more vulnerable to changes in demand or prices of that commodity.
B
A legal system that provides for lawsuits against firms and their management increases country risk.
C
Firms prefer to invest in countries where the legal system is biased or subject to government interference.
D
Declining credit spreads signal credit quality deterioration.