This topic contains a solution. Click here to go to the answer

Author Question: What factors lie behind capital inflows to the developing world? What will be an ideal ... (Read 73 times)

sarasara

  • Hero Member
  • *****
  • Posts: 521
What factors lie behind capital inflows to the developing world?
 
  What will be an ideal response?

Question 2

Since foreign credit dries up in crises when it is most needed, developing countries can protect themselves from default by
 
  A) cutting off imports of goods.
  B) allowing the exchange rate to float.
  C) using equity finance only.
  D) accumulating high levels of international reserves.
  E) avoiding the international capital market.



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
Marked as best answer by a Subject Expert

jaaaaaaa

  • Sr. Member
  • ****
  • Posts: 341
Answer to Question 1

Many developing countries have received a lot of capital inflows that lead them to a huge debt to foreigners. These debts are been produced because the economy of the developing world is very small compared to the economy of the industrial world. Since developing countries face a lot of poverty and poor financial institutions, national savings is often low and because of that, they are always facing current account deficit. Even though, these countries are very poor in capital, there are opportunities for profitable introduction or expansion of firms and equipments, and these opportunities give good reason for a high level of investment. However, because these countries always have deficits in their current account, a country can obtain resources from abroad to invest even if its domestic savings level is low. This means that the country is going to have to borrow money from a foreign country. These ways of production are the one that lie behind capital inflows because by helping these countries to grow and expand, the price to be pay is a big debt which they know based on their circumstances its going to be hard to repaid.

Answer to Question 2

D




sarasara

  • Member
  • Posts: 521
Reply 2 on: Jun 30, 2018
:D TYSM


bimper21

  • Member
  • Posts: 309
Reply 3 on: Yesterday
Gracias!

 

Did you know?

People often find it difficult to accept the idea that bacteria can be beneficial and improve health. Lactic acid bacteria are good, and when eaten, these bacteria improve health and increase longevity. These bacteria included in foods such as yogurt.

Did you know?

HIV testing reach is still limited. An estimated 40% of people with HIV (more than 14 million) remain undiagnosed and do not know their infection status.

Did you know?

A strange skin disease referred to as Morgellons has occurred in the southern United States and in California. Symptoms include slowly healing sores, joint pain, persistent fatigue, and a sensation of things crawling through the skin. Another symptom is strange-looking, threadlike extrusions coming out of the skin.

Did you know?

For pediatric patients, intravenous fluids are the most commonly cited products involved in medication errors that are reported to the USP.

Did you know?

The FDA recognizes 118 routes of administration.

For a complete list of videos, visit our video library