Answer (B) is correct . An expanding U.S. economy would result in greater demand for raw materials from these countries. Also, since the money supply and interest rates are inversely proportional (when the money supply is rising, interest rates are falling), less developed nations could borrow again at lower rates. Moreover, if the money supply is rising, inflation might increase and U.S. dollars would become cheaper, thereby easing the burden of foreign debtors with obligations payable in dollars.
Answer (A) is incorrect because A recession would result in less U.S. demand for raw materials from abroad and a reduction in funds available to the underdeveloped nations to pay debts.
Answer (C) is incorrect because An expansion of lending authority could only increase the debt outstanding and make it less possible for less developed countries to service their debts.
Answer (D) is incorrect because Tariffs would reduce exports to the U.S. and thus the funds available for debt service.
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