How can debt policies for DVC create a moral hazard?
What will be an ideal response?
If IAC or international organizations extend loans or grants to DVC they expect to be repaid. If IAC or international organizations, however, later provide assistance to DVC through debt relief or debt forgiveness, the DVC can come to expect such relief or assistance when they receive future grants or loans. This situation creates a moral hazard in which debt relief or debt forgiveness becomes the expectation when grants or loans are made and no serious effort is made to repay the grants or loans.
You might also like to view...
List and describe the three different types of transfers discussed in this chapter. Give a hypothetical example of each to help support your answer
An increase in the U.S. price level relative to the price level of U.S. trading partners will cause the aggregate expenditures function in the United States to
A. shift up. B. shift down. C. get flatter. D. get steeper.
Which of the following will cause an increase market supply?
A. An increase in the price of the good. B. An increase in demand for the good. C. A technological innovation that lowers the marginal cost of producing the good. D. A decrease in the number of firms in the market.
Macroeconomic policies are government policies designed to affect: A. the environmental impact of all industries.
A. particular sectors of the economy. B. the performance of the economy as a whole. C. the economic activity of the government.