Which of the Following Resulted in a Surge in International

question 13

Multiple Choice

Which of the following resulted in a surge in international lending to developing countries in the mid-1970s to early 1980s?

• A)Oil-exporting countries had a low short-run propensity to save out of their extra income.
• B)The real interest rates in the industrial countries were significantly high.
• C)The governments of the developing countries encouraged foreign direct investment (FDI) and foreign institutional investments (FII).
• D)Lending to developing countries gained momentum through "herding" behavior.

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Definitions:

Von Neumann-Morgenstern

Pertains to a theorem used in expected utility theory, which provides an axiomatic basis for the selection of optimal choices under uncertainty.

Utility Function

An economic model that quantifies the satisfaction or happiness a consumer receives from consuming goods and services.

Expected Utility

A theory in economics that models how agents choose among risky alternatives to maximize their satisfaction.

Income

Receipts garnered on a habitual basis as a result of engaging in work or investment.