ECONOMICS
ECONOMIC INSTITUTIONS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A situation where the government spends more than it receives in revenue
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Small islands have to borrow extensively from international institutions to balance their budget
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Growth is stiffed due to the low demand for goods and services
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a situation of higher interest rates in a country affecting investments
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Detailed explanation-1: -One of the main reasons for this is the region’s dependence on consumer commodity imports. The imbalance of Caribbean economies is noted by the IMF to have started in the early 1990s due to a loss in preferential trade agreements with European markets.
Detailed explanation-2: -Rising debt reduces business investment and slows economic growth. It also increases expectations of higher rates of inflation and erosion of confidence in the U.S. dollar.
Detailed explanation-3: -There are at least four separate consequences of rising debt that can adversely affect the current and subsequent performance of an economy. These include transfers, financial distress, bezzle (or fictional wealth), and additional spillover adjustment costs termed hysteresis.
Detailed explanation-4: -The national debt also impacts the economy because if it gets too high, consumer and business confidence in the economy may dwindle, which could lead to turmoil in the financial markets and higher interest rates.