Indebtedness became a major problem in the world economy in the 1980s. Debt service must be met before other obligations of governments. Why did this happen?
A) recycled dollars from oil purchases were lent recklessly and rising interest rates later trapped borrowers
B) economic growth goals were too ambitious
C) banks raised interest rates and refused to negotiate new ones
D) previously colonial powers paid off debts

Question

Quizplus · Accepted Answer

Recycled dollars from oil purchases were lent recklessly and rising interest rates later trapped borrowers. This statement accurately describes the roots of the debt crisis in the 1980s. Many banks had an abundance of petrodollars that they were eager to lend out, and these loans often went to developing countries that were seeking to fuel economic growth. However, as interest rates rose in the 1980s, debt service became more and more burdensome for these countries, leading to a debt crisis that had far-reaching consequences.

Indebtedness Became a Major Problem in the World Economy in the 1980s