If a Nation's Leaders Make Rational Decisions, They Would Weigh

question 58

Multiple Choice

If a nation's leaders make rational decisions, they would weigh the costs and benefits of defaulting on the debt as follows if the:

• A) borrowing costs are greater than the repayment costs, the borrower will not default.
• B) nation's consumption after repayment of principal and interest exceed the consumption available after default costs are deducted, the nation will repay.
• C) nation can borrow from other lenders more cheaply, it will simply refinance and deal with the problem later.
• D) nation can sell off assets and increase the workweek to export more, it will definitely repay.

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