If a country borrowed reserves from the IMF to finance an external imbalance, the IMF usually imposed contractionary policies as a condition for the loan.

Question

Quizplus · Accepted Answer

The IMF typically requires countries that borrow from it to implement policies aimed at reducing fiscal deficits and external imbalances, which often include contractionary fiscal and monetary policies. These measures are intended to stabilize the economy but can lead to reduced economic growth in the short term.

If a Country Borrowed Reserves from the IMF to Finance