What is a sudden stop?
A) a situation in which a nation runs out of labor resources
B) a situation in which a nation's prime minister has to call a new election
C) a situation in which a nation's financial markets collapse and investors lose everything
D) a situation in which a nation's creditors decide to cease new lending

Question

Quizplus · Accepted Answer

A sudden stop refers to a scenario where a country experiences a sudden halt in capital inflows, leading to a crisis situation because the country can no longer finance its current account deficit. This often forces the country to make abrupt adjustments, such as drastically reducing imports or seeking emergency financing, due to the sudden lack of new lending from foreign creditors.

What Is a Sudden Stop