Which of the following describes the vicious circle of poverty?
A. Government spending for public goods is inflationary and this undermines incentives to
save and invest.
B. Higher incomes increase consumption at the expense of capital accumulation, which
causes income to fall.
C. Low per capita incomes cause low levels of saving and investment, which mean low
productivity and therefore low incomes.
D. A growing national income increases the demand for money, which increases the interest
rate and reduces investment.
C. Low per capita incomes cause low levels of saving and investment, which mean low
productivity and therefore low incomes.
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In the economic way of thinking, the costs of a recession are predominantly
A) the costs of using money. B) the excessive costs of advertising in the face of persistent, falling demand. C) the costs of disappointed expectations and discoordination of plans. D) the costs associated with high nominal interest rates.
Legal or governmental restrictions that give monopolistic advantages to a firm include all of the following EXCEPT
A) economies of scale. B) tariffs. C) licenses. D) franchises.