An Emerging Economy as a Current GDP of $100 Billion

question 47

Multiple Choice

An emerging economy as a current GDP of $100 billion. It borrows $20 billion at a real interest rate of 5%, which it will repay next year. The costs of default are 25% of GDP. Suppose that the real rate of interest rises from 5% to 7.5%. With the country's GDP level of $110 billion, what will happen to the threshold level of GDP?

• A) The threshold level of GDP will rise.
• B) The threshold level of GDP will fall.
• C) The threshold level of GDP will remain constant.
• D) Not enough information is provided to answer the question.

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Definitions:

Receptors

Specialized cells or proteins that detect and respond to chemical signals, such as hormones or neurotransmitters.

Red

A primary color that can be perceived by the human eye and is often associated with meanings of love, danger, or warning.

Green

Often associated with environmental sustainability, the color green symbolizes growth, harmony, and freshness, and is linked with initiatives to protect the natural environment.

Blue

A primary color in the spectrum lying between green and violet, often associated with depth and stability, and representing qualities like trust, loyalty, wisdom, and confidence.