When Developing Countries Borrow in International Credit Markets, Many Find

question 180

Multiple Choice

When developing countries borrow in international credit markets, many find that they must borrow in currencies other than their own (such as dollars, yen, or euros) . Why are international creditors willing to make loans in dollars, yen, or euros but not in the developing countries' currencies?

• A) Lenders are not well-informed about developing countries' economic situations.
• B) Lenders believe that the currencies of developing countries will always appreciate.
• C) Lenders receive higher interest rates on loans in dollars, yen, or euros than on loans made in the currencies of developing countries.
• D) Lenders believe that developing countries have a history of weak macroeconomic management and imprudent monetary and fiscal policies.

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Definitions:

Strategic Posture

An organization's stance or approach in planning and decision-making processes to shape its long-term direction and the way it interacts with its environment.

Blue Ocean Strategy

A business approach that involves creating a new market space or "blue ocean," thereby making the competition irrelevant.

Strategy Canvas

A visual tool used in strategic planning to map out the current market positions of companies versus their competitors according to relevant factors.

Value Curve

A graphical representation used to show how a company differs from its competitors based on various factors important to the market.