Final answer:
External debt is most likely to be highest among middle-income nations due to challenges in managing debt with less diversified economies and exports, making it harder to deal with global market volatility.
Step-by-step explanation:
External debt is most likely to be highest among middle-income nations. These nations often borrow money from other countries to fund their expansion or growth goals, potentially leading to a significant buildup of debt.
Many middle-income countries in regions like Latin America, the Caribbean, East Asia, and the Pacific have faced these challenges.
In contrast, while high-income economies like the United States, Canada, the European Union, Japan, Mexico, and China have experienced significant budget deficits, their ability to manage debt is usually better due to stronger economic structures.
Both middle-income and high-income nations face the risk of debt accumulation, but it is typically more pressing for middle-income nations as their economic activities and exports might not be diversified enough to withstand global market volatility.
This can prove to be a problem for repaying these debts when global markets reduce the value of a country's goods, making the debt burden unmanageable and leading to financial trouble. Therefore, the risk of higher external debt is more prominent in middle-income countries.