A country with high commodity dependence is most vulnerable to which risk?

• A. Price volatility of primary products
• B. Rapid urbanization
• C. Demographic explosion
• D. Labor shortages in services

Answer: (A)

When an economy relies heavily on commodities, its income and government revenue move with world market prices for those primary products. This exposure to price swings creates unstable budgets, unpredictable investment, and potential macroeconomic instability, because earnings can suddenly rise or fall with global demand and supply.

Other issues like rapid urbanization, demographic growth, or service-sector labor dynamics can occur in any developing economy, but they don’t stem specifically from dependence on commodity prices in the same direct way. The defining risk for commodity-dependent countries is the volatility of prices for their primary product exports.