Final answer:
A borrower nation must invest funds from abroad to increase productivity and attract new foreign capital; failing to do so can lead to economic difficulties. The correct answer is 'c. both A and B'.
Step-by-step explanation:
A borrower nation can find itself in a bind if it does not invest the incoming funds from abroad in a way that leads to increased productivity. This can cause significant issues including difficulties in repaying the borrowed funds, leading to economic stress when conditions change. Historical examples include several large economies in Latin America and African nations in the 1970s and 1980s that faced problems due to a failure in boosting productivity through their borrowed funds. So, the correct answer to the question is: A borrower nation can find itself in a bind if it does not invest the incoming funds from abroad in a way that leads to increased productivity as well as the attraction of new foreign capital. Therefore, the correct answer is 'c. both A and B'.