Which of the following best explains when a country's level of economic development might mislead an international investor?

• A. When the country imposes high tariffs on imported goods.
• B. When the country has a large agricultural sector relative to manufacturing.
• C. When the reported economic development is based on outdated or inaccurate data, leading investors to overestimate future returns.
• D. When the country has a high population growth rate but low GDP per capita.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of economic development as it relates to international investment. Economic development typically refers to improvements in standards of living, income levels, and economic productivity within a country.
2. Step 2: Recognize that international investors rely on economic development indicators, such as GDP growth, GDP per capita, and other economic data, to assess the potential risks and returns of investing in a country.
3. Step 3: Analyze why certain factors might mislead investors. For example, high tariffs or a large agricultural sector provide structural information but do not necessarily mislead if data is accurate and current.
4. Step 4: Identify that outdated or inaccurate data can cause investors to overestimate the country's economic potential because the reported figures may not reflect the current economic reality or future prospects.
5. Step 5: Conclude that the most misleading scenario for investors is when economic development data is unreliable or outdated, as this directly affects their ability to make informed investment decisions.