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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