Multiple choice

Some developing countries use their limited foreign exchange reserves to buy iron ore for producing steel. This steel earns more foreign exchange than it costs. However, this is a foolish policy, especially as most of these countries have large deposits of iron are, which can be mined with minimal foreign exchange expense.

Which of the following, if true, most supports the policy of these countries to purchase iron ore abroad?

  1. Most developing countries have limited foreign exchange reserves for infrastructure development.

  2. Most developing countries want to make a quick buck due to the weakening of the dollar.

  3. The process of mining iron ore is labor intensive.

  4. Mining iron ore requires extensive import of highly expensive equipment, technology and training on a sustained basis.

  5. The price of steel and commodities on the international markets has risen significantly.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

Import of technology, expensive machinery and continual training would perhaps be beyond the reach of most developing nations or may require a much greater outlay of foreign exchange than that involved in the purchase of iron ore.

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