Debt crises:
A)reduce a nation's buying power.
B)force imports down.
C)force exports up.
D)reduce a nation's buying power, force exports up and force imports down.

Question

Quizplus · Accepted Answer

Debt crises can lead to a reduction in a nation's purchasing power because the government has to divert funds towards debt repayment instead of investing in the economy. This can lead to a decrease in imports as the country may not have enough funds to purchase foreign goods. At the same time, debt crises can force a country to increase exports in order to generate income to pay off debts. Therefore, option D is the correct answer as it encompasses all of the possible impacts of a debt crisis.

Debt Crises