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Economics: International Capital Movement

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Economics: International Capital Movement

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Questions and Answers

What is one major reason why international commodity agreements failed to stabilize export earnings and prices of developing countries?

The high cost of operating them and the lack of support from developed nations.

What is foreign debt, and what types of organizations are included in it?

Money borrowed by a government, corporation, or private household from another country's government or private lenders, including international organizations like the World Bank, ADB, and IMF.

What is the primary constraint in the progress of developing countries, and how can they address it through borrowing?

Shortage of capital, and increasing productive investment by reasonable levels of borrowing to accelerate economic growth.

How can large foreign debt hinder economic growth, and what is the ideal scenario for borrowing?

Large debt can hinder growth, and the ideal scenario is to borrow at reasonable levels and make timely repayments to avoid debt accumulation. Signup and view all the answers

What is the primary purpose of international commodity agreements, and why have they failed to achieve it?

To stabilize export earnings and prices of developing countries, but they have failed due to high operating costs and lack of support from developed nations. Signup and view all the answers

What are the components of total foreign debt?

A combination of short-term and long-term liabilities. Signup and view all the answers

What is the relationship between foreign debt and economic growth in developing countries?

While borrowing can accelerate economic growth, large debt can hinder it. Signup and view all the answers

What is the ideal scenario for a developing country to borrow from foreign lenders?

Increasing productive investment by reasonable levels of borrowing and making timely repayment of the debt. Signup and view all the answers

What is the primary problem associated with heavy external borrowing in developing countries?

High indebtedness, causing severe economic problems. Signup and view all the answers

What is the key consequence of excessive foreign debt on developing countries?

Severe economic problems, including hindered economic growth. Signup and view all the answers