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The Repayment of a Debt to a Foreign Lender Could

Question 127

Multiple Choice

The repayment of a debt to a foreign lender could create a recession in the borrowing country because:


A) households and businesses in the borrowing country would have to cut their spending in order to pay back the lending country.
B) part of the labor force in the borrowing country would have to be diverted to producing goods for export to the lending country.
C) the general level of prices in the borrowing country would decrease as more goods and services were produced to pay off the debt.
D) output in the borrowing country would increase faster than the labor force as production grew to meet debt obligations, resulting in too little unemployment.

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