Question

which of the following is false? question 20select one: a. current account deficits must be financed through inflows of capital. b. borrowed funds are always used in a manner that contributes to the expansion of the country's productive capability. c. loans from abroad add to a country's stock of external debt and generate debt service. d. debt service can become an unsustainable burden that holds back development.

Answer 1

The false statement is option b. borrowed funds are always used in a manner that contributes to the expansion of the country's productive capability.

Step-by-step explanation:

The false statement is option b. borrowed funds are always used in a manner that contributes to the expansion of the country's productive capability.

In reality, borrowed funds can be used in various ways and may not always contribute to the expansion of a country's productive capability. For example, if a country borrows money but fails to invest it in productive economic assets, it may face difficulties in repaying the borrowed funds.

Therefore, while economic borrowing and trade deficits can be beneficial for a country's development, it is important for the borrowed funds to be used wisely and invested in ways that enhance productivity.