In the Diagram in Question #13 Above, Where Curve 0ABC

question 13

Multiple Choice

In the diagram in Question #13 above, where curve 0ABC relates the market value of LDC external debt to the face value of the external debt, the range __________ indicates a situation where debt relief or forgiveness for LDCs would reduce amount of debt owed by developing countries but would also increase the market value of the debt. In this range, any one bank __________.

• A) AB; would lose by forgiving debt unless all other banks also forgave debt
• B) AB; could gain by forgiving debt even though other banks did not forgive debt
• C) BC; would lose by forgiving debt unless all other banks also forgave debt
• D) BC; could gain by forgiving debt even though other banks did not forgive debt

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Definitions:

Aggregate Income

The total income earned by all individuals or entities in an economy, including wages, profits, rents, and investment earnings, over a specific time period.

Aggregate Consumption

The total amount of goods and services consumed in an economy over a specific period.

Consumption Function

A relationship in economic terms between the gross national income and the aggregate consumption level.

Aggregate Income

The total income earned by all factors of production in an economy, including wages, rents, interest, and profits, over a specific period.