A Disadvantage of Foreign Aid Is That _____

question 157

Multiple Choice

A disadvantage of foreign aid is that _____

• A) it leads to a decline in the standard of living in donor countries.
• B) it leads to the disinvestment of public sector industries in recipient countries.
• C) the agricultural sectors of recipient countries experience surplus output.
• D) government officials are insulated from their own incompetence.
• E) it leads to hyperinflation in the recipient countries.

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Definitions:

Reserves

Reserves are funds or materials set aside or saved for future use or to cover unexpected emergencies, often used in financial, resource, or energy sectors.

Equilibrium Exchange Rate

The exchange rate at which the demand for a currency is exactly equal to its supply in the foreign exchange market.

Purchasing Power Parity Theory

An economic theory that compares different countries' currencies through a "basket of goods" approach to determine relative currency values.

Exchange Rates

The value of one currency expressed in terms of another currency, used in international trade and investment.