A Key Difficulty That Banks Encounter in Lending to Foreign

question 11

Multiple Choice

A key difficulty that banks encounter in lending to foreign governments is that

• A)governments insist on paying below-market interest rates.
• B)governments raise most of their money in financial markets and are rarely interested in taking out bank loans.
• C)governments prefer to borrow from domestic banks.
• D)the credit risk involved is higher than with private lending.

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Definitions:

Long-Run Supply Curve

A graphical representation showing the relationship between the market price of a good and the quantity of it that producers are willing to supply when all production inputs are variable.

Downward-Sloping

Describes a line or curve on a graph that descends from left to right, indicating a negative relationship between two variables.

Purely Competitive

A market scenario where all participants sell indistinguishable goods, ensuring no one seller can influence prices, creating an ideal competition.

Market Supply Curve

A graphical representation showing the relationship between the price of a good and the total output of the good all producers are willing to supply.