WorksheetsExternal Debt Sustainability
Total questions: 15
Worksheet time: 8mins
Which component summarizes all economic transactions between residents and non-residents?
Financial Account
Capital Account
Balance of Payments
International Investment Position
The current account balance equals:
Net Exports + Primary + Secondary Income
Capital Account + Financial Account
Exports minus Imports
Foreign Direct Investment + Portfolio Investment
If a country receives a foreign grant and spends it on imports, what happens to the current account?
Increases
Decreases
Remains unchanged
Turns surplus
Which of the following raises primary income in the balance of payments?
Tourism receipts
Higher interest payments on debt
Workers remittances abroad
A resident invests abroad and receives dividends
External debt refers to:
Only government foreign borrowing
Total debt owed to domestic investors
Total debt owed by residents to non-residents
Short-term loans only
A country’s external debt is sustainable when:
It can service debt without large policy shifts
It can refinance debt annually
It runs a persistent current account surplus
It pegs its currency to the US dollar
Which of the following is part of non-debt flows (OAF) in the debt dynamics equation?
Sovereign bond issuance
Concessional loans
Short-term external borrowing
FDI inflows
According to the debt dynamics equation, if the real interest rate (r) exceeds growth (g), debt-to-GDP will:
Fall automatically
Increase over time
Remain stable
Depend on imports
The snowball effect in debt dynamics refers to:
Interest-growth differential amplifying debt
Debt forgiveness
Rapid inflation
Exchange rate volatility
Which policy tool helps stabilize liquidity after forex intervention?
Fiscal expansion
Sterilization
Capital controls
Debt restructuring
Holding large foreign reserves helps:
Reduce liquidity
Enhance market confidence
Increase speculation
Boost inflation
The main cost of holding large forex reserves is:
Fiscal deficit
Opportunity cost of capital
Currency appreciation
Reduced imports
If a country defends its currency during a permanent terms-of-trade shock, it risks:
Gaining competitiveness
Strengthening fiscal balance
Boosting growth
Losing reserves and delaying adjustment
The import cover ratio measures:
Reserves relative to imports
Exports relative to GDP
Imports relative to external debt
Fiscal deficit coverage
According to IMF’s reserve adequacy assessment, which indicator is not included?
Import cover
Stock market capitalization
Short-term debt
Broad money (M2)
