Explanation:
Autocracies may be more likely to default than democracies because, as noted previously, defaults put pressure on, and may cause a change in, the leadership of the country. There may be less pressure on the leaders of dictatorships if the country defaults. Also, the more independent the central bank, the more difficult it may be for a country to print money.
(Book 4, Module 51.2, LO 51.e)
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Question 96
Which of the following statements is incorrect regarding the factors that influence a country's sovereign default risk?
A
Countries with more diversified economies are more likely to have stable tax receipts.
B
Governments make significant commitments to their citizens, including health care and pension payments.
C
Rating agencies and other market participants also look at implicit guarantees by other entities.
D
There may be more pressure on the leaders of dictatorships if the country defaults.
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