Question: Why Is It Important To Have A Diversified Economy?

What are the benefits of trade diversification show in list?

Three key advantages of diversification include: Minimising risk of loss – if one investment performs poorly over a certain period, other investments may perform better over that same period, reducing the potential losses of your investment portfolio from concentrating all your capital under one type of investment..

What are the benefits of diversification?

The benefits of diversification include:Minimizes the risk of loss to your overall portfolio.Exposes you to more opportunities for return.Safeguards you against adverse market cycles.Reduces volatility.

Why should Nigeria economy be diversified?

DIVERSIFICATION OF THE NIGERIAN ECONOMY: AGRICULTURE AND SOLID MINERALS AS PANACEA. Diversification of the Nigerian economy with specific emphasis on the agricultural and solid mineral sectors is feasible in view of Nigeria’s resource endowment. Nigeria has a large expanse of agricultural land.

How can developing countries increase economic growth?

To increase economic growthLower interest rates – reduce the cost of borrowing and increase consumer spending and investment.Increased real wages – if nominal wages grow above inflation then consumers have more disposable to spend.Higher global growth – leading to increased export spending.More items…•

What is the difference between a stock’s price and its value?

There is a big difference between the two. The stock’s price only tells you a company’s current value or its market value. So, the price represents how much the stock trades at—or the price agreed upon by a buyer and a seller. … On the other hand, the intrinsic value is a company’s actual worth in dollars.

What is export diversification index?

The diversity of an economy’s exports and its export performance reveal to what extent a country is able to compete in global markets. They are also indicators of the country’s capacity to participate in global value chains, the worldwide network of processes that add value to the good or service being produced.

Why is export diversification important?

Diversification helps countries to hedge against adverse terms of trade shocks by stabilizing export revenues. It enables them to direct positive terms of trade shocks into growth, knowledge spillovers and increasing returns to scale.

What does diversification mean to investors?

Diversification is the practice of spreading your investments around so that your exposure to any one type of asset is limited. This practice is designed to help reduce the volatility of your portfolio over time. … One way to balance risk and reward in your investment portfolio is to diversify your assets.

Is diversification a good strategy?

No. What diversification does is reduce volatility. Diversification does indeed smooth out investment returns, but that’s a psychological decision, not an investment decision. As a result, asset allocation diversification does not help investment performance, it hurts it.

What does diversification mean?

Diversification is a strategy to manage your investment risks by spreading your money across a variety of assets. Diversification can help minimize certain risks, but it doesn’t eliminate all risk.

What are the 4 factors of economic growth?

Economic growth only comes from increasing the quality and quantity of the factors of production, which consist of four broad types: land, labor, capital, and entrepreneurship.

What are the major obstacles to economic growth in developing countries?

Declining terms of trade. Savings gap; inadequate capital accumulation. Foreign currency gap and capital flight. Corruption, poor governance, impact of civil war.

Is diversification good or bad?

Diversification can lead into poor performance, more risk and higher investment fees! … The usual message to investors is: instead of diversifying from traditional stocks & bonds, diversify into multiple higher-cost exchange-traded funds that invest in specific sectors or strategies.

What is agricultural diversification and why is it important?

Agricultural diversification is one of the essential components of economic growth. It is the stage where traditional agriculture is transformed into a dynamic and commercial sector by shifting the traditional agricultural product mix to high standard products, that has a high potential in stimulating production rate.

Why is it important to start with temporary investments?

What are Temporary Investments? … These investments are commonly used when a business has a short-term excess of funds on which it wants to earn interest, but which will be needed to fund operations within the near future. These types of investments are usually very safe, but also have quite a low rate of return.

What is diversifying Canadian exports?

What is trade diversification? Trade diversification is about securing more opportunities for Canadian exporters and investors to compete and succeed in thriving and fast growing global markets and sectors.

What does it mean to have a diversified economy?

Economic diversification is the process of shifting an economy away from a single income source toward multiple sources from a growing range of sectors and markets. Traditionally, it has been applied as a strategy to encourage positive economic growth and development.

Is it possible to have economic growth in a country without economic development?

It is possible to have economic growth without development. i.e. an increase in GDP, but most people don’t see any actual improvements in living standards. … Economic growth may only benefit a small % of the population. For example, if a country produces more oil, it will see an increase in GDP.