The accumulation of international debt increased the debt service requirements of the indebted countries.After the debt crisis began,this caused

Question

Quizplus · Accepted Answer

The accumulation of international debt caused indebted countries to adopt strongly contractionary policies to reduce consumption and government deficits. This was necessary to meet the increased debt service requirements and stabilize their economies. Expansionary policies (choice A) would have further increased their debt and worsened the crisis. Large capital inflows (choice B) may have temporarily helped to service the debt, but ultimately worsened the problem by increasing the dependency of indebted countries on foreign creditors. Industrial policies targeted on import substitutes (choice D) may have helped to reduce the trade deficit, but would not have addressed the fundamental problem of excessive debt. A reduction in inequality (choice E) may be a desirable outcome, but is not a direct consequence of the debt crisis.

The Accumulation of International Debt Increased the Debt Service Requirements