Which of the following can be a possible effect on a borrowing nation if the real interest rate on the loans rises?
A)The fixed costs of nonrepayment can increase
B)There will be a higher incentive to default
C)a default imposes a smaller penalty on the borrower
D)A default imposes a bigger penalty on the borrower

Question

Quizplus · Accepted Answer

When the real interest rate on loans rises, the cost of borrowing increases, making it more expensive for the nation to service its debt. This can create a higher incentive to default, as the financial burden becomes more challenging to manage.

Which of the Following Can Be a Possible Effect on a Borrowing