Which of the following best describes how natural resources impact economic development?

• A. The availability of natural resources can contribute to economic development, but effective institutions and policies are also necessary for sustained growth.
• B. Economic development is solely determined by the quantity of natural resources a country possesses.
• C. Countries with abundant natural resources always experience rapid and sustained economic growth.
• D. Natural resources have no significant effect on a country's economic development.

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the role of natural resources in economic development. Natural resources provide raw materials and inputs that can boost production and economic activity, which can contribute positively to development.
2. Step 2: Recognize that while natural resources are important, they are not the sole determinant of economic development. Other factors such as institutions, governance, policies, human capital, and technology also play crucial roles.
3. Step 3: Analyze why having abundant natural resources does not guarantee rapid or sustained growth. This is often due to issues like the 'resource curse,' where reliance on resources can lead to economic volatility, corruption, or neglect of other sectors.
4. Step 4: Evaluate the importance of effective institutions and policies. Good governance, stable institutions, and sound economic policies help ensure that natural resources are managed efficiently and that their benefits contribute to long-term growth.
5. Step 5: Conclude that the best description is that natural resources can contribute to economic development, but sustained growth depends on effective institutions and policies, rather than just the quantity of resources alone.