What can exacerbate a debt crisis if the debtor country borrows in dollars?
A) A loss in the value of the debtor's currency relative to the dollar
B) Collapse of the floating exchange rate
C) Conditions imposed by the International Monetary Fund
D) Nature of the two-level game in which domestic politics trumps repayment of loans

Question

Quizplus · Accepted Answer

If the debtor country borrows in dollars and their currency loses value relative to the dollar, the amount they owe in their own currency will increase, making it harder to pay back their debts. This is known as currency risk.

What Can Exacerbate a Debt Crisis If the Debtor Country