Economic crises struck many developing countries outside of East Asia in the early 1980s in large part because of decisions to
A) use foreign loans to finance large infrastructure projects or domestic consumption.
B) use foreign loans to subsidize export oriented development
C) use domestic savings to finance large infrastructure projects or domestic consumption.
D) use government funds to fight drugs and terrorism.
E) allow corrupt governments to put their money into foreign banks.

Question

Quizplus · Accepted Answer

Many developing countries in the 1980s took out large foreign loans to finance large infrastructure projects or domestic consumption, often with little consideration for their ability to repay the loans. This led to a debt crisis and economic crises in many countries, as they struggled to service their debts and faced high inflation, fiscal deficits, and currency devaluations. This was particularly acute in Latin America, where many countries had taken out large loans in the 1970s to finance import substitution industrialization (ISI) policies, which aimed to promote domestic industrialization and reduce dependence on foreign imports. However, these policies were often unsuccessful and led to high levels of inflation and debt, which then contributed to the economic crisis of the 1980s.

Economic Crises Struck Many Developing Countries Outside of East Asia