The Vicious circle theory indicates that ?
Correct answer: C. poverty perpetuates itself in mutually reinforcing circles on supply and demand sides
- A. a country is poor because it has lower productivity but high savings
- B. as countries grow richer they save less
- C. poverty perpetuates itself in mutually reinforcing circles on supply and demand sides
- D. market size is large in LDCs
Explanation
The vicious-circle theory says low income causes low saving and investment, which keeps productivity and income low; weak demand reinforces the same process. Thus poverty perpetuates itself through mutually reinforcing supply-side and demand-side circles.
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