Since Foreign Credit Dries Up in Crises When It Is

question 61

Multiple Choice

Since foreign credit dries up in crises when it is most needed, developing countries can protect themselves from default by

• A) cutting off imports of goods.
• B) allowing the exchange rate to float.
• C) using equity finance only.
• D) accumulating high levels of international reserves.
• E) avoiding the international capital market.

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Definitions:

Input

Refers to the resources used in the production of goods and services, such as labor, raw materials, and capital.

Returns To Scale

The change in output as all inputs are increased proportionally in the production process.

Inputs

The resources such as labor, materials, and capital that are used in the production process to create goods and services.

Returns To Scale

The rate at which output increases in response to proportional increases in all inputs or factors of production.