The correct answer is the last statement: "The nations had few natural resources, so they established colonies as a source of raw materials. The materials would flow into the nation, where they would be turned into manufactured products and sold to other nations. The net result would be a financial gain in terms of real money to the parent nation."
Mercantilism was a system based on establishing a relationship with colonies where a nation would get cheap raw materials from a colony and sell manufactured products to the same colony and other nations.
Colonies were important also because of metals found in them. A kingdom's wealth was measured in metals, that is, gold and silver. In order to keep these metals nations would keep a positive trade balance, that is, nations should export more than import, exploring colonies to support this system.
