What Is the Commitment Problem of an Alliance

question 8

Multiple Choice

What is the commitment problem of an alliance?

• A)It is questionable whether member states will uphold the terms of the alliance.
• B)Member states may not actually sign an alliance treaty.
• C)Once an alliance treaty is signed,it is questionable whether it will be ratified.
• D)It is often unclear in an alliance who can declare war.

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Definitions:

Short-Term Credit

Borrowings taken by a company to fulfill its short-term financial needs, typically repaid within a year.

Blanket Inventory Lien

A legal claim on all inventory items of a borrower by a lender as collateral for a loan.

Commercial Paper

A type of unsecured, short-term debt instrument issued by corporations, typically used for the financing of payroll, accounts payable, and inventories.

Best Interest Rate

The most favorable interest rate available to a borrower based on their creditworthiness and market conditions.