GED Social Studies TestGeography and the WorldMedium
A geographer is studying the impact of remittances on the economic development of a small island nation, where a significant portion of the population has migrated abroad for work. What term best describes this flow of money from migrant workers to their home country?
- AForeign Direct Investment (FDI)
- BRemittances
- COfficial Development Assistance (ODA)
- DTrade Surpluses
Show answer & explanationAnswer & explanation
Correct answer: B. Remittances
Remittances are transfers of money by foreign workers to their home country. They are a significant source of income for many developing nations and directly impact economic development.
Why the other options are wrong
- A. FDI involves direct investment by a company in another country, not money sent by individuals.
- C. ODA is aid given by governments to support developing countries, not personal transfers.
- D. Trade surpluses occur when a country exports more than it imports, unrelated to individual money transfers.
Remittances
Money sent by migrant workers to their families or communities in their home country, often a crucial source of income and foreign exchange for developing nations.
- Funds sent by migrants to home country
- Significant impact on developing economies
- Can reduce poverty and boost local investment
- Often more stable than other capital flows
Memory trick: Migrants send money back, 'remit' the economic track.