In low-income nations, the budget constraint is usually:
A) more lenient because creditor nations are interested in helping poor countries grow.
B) more stringent because poor nations have low credit ratings and pay higher rates of interest.
C) ignored by international financial markets.
D) good for these nations because they should not get into debt they are unable to repay.

Question

Quizplus · Accepted Answer

In low-income nations, the budget constraint is usually more stringent because poor nations have low credit ratings and pay higher rates of interest. These nations have less access to credit and are considered higher risk borrowers, leading to stricter budget constraints in order to avoid defaulting on their loans.

In Low-Income Nations, the Budget Constraint Is Usually