Which of the Following Is a Reason That Developing Countries

question 104

Multiple Choice

Which of the following is a reason that developing countries are running large surpluses?

• A) They are required to do so by IMF.
• B) They have defaulted on international loans.
• C) They have pegged exchange rates and thus the growth of exports must drive surplus up.
• D) They have a strong desire to accumulate international reserves to protect against a sudden stop of capital inflows.
• E) They don't know how to manage their surpluses.

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Definitions:

Absolute Advantage

The ability of a country, individual, or firm to produce a good or service at a lower cost per unit than other producers.

Trade Benefits

Advantages countries gain from engaging in international trade, such as increased economic growth, diversification, and access to new markets.

Comparative Advantage

An economic theory stating that countries or entities benefit from specializing in producing goods where they have lower opportunity costs, leading to more efficient global production.

Absolute Advantage

The ability of an entity to produce a good or service more efficiently than its competitors when given the same resources.