The Vicious circle theory states that ?
Correct answer: D. low per capita incomes creates low savings that keep incomes low
- A. growing government assistance create addiction to welfare programs
- B. low income levels create pressure for money creation
- C. low income levels create pressure for cheap imports
- D. low per capita incomes creates low savings that keep incomes low
Explanation
The vicious circle of poverty links low income with low saving and investment, which limits capital formation and keeps productivity and income low. It is therefore a self-reinforcing cycle rather than merely dependence on welfare or cheap imports.
Last updated
About Macroeconomics
The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
Practise Macroeconomics
1,462 free Macroeconomics MCQs from Economics, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Exams that ask Economics questions like this
Economics is on 2 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
Related questions
1. The most widely traded currency in the foreign exchange market is the ?
85% of the world's population lives in developing countries and receives about _____ of the world's income?
A 44-nation survey regrading religions found that_________________?
A bank has excess reserves to lend but is unable to find anyone to borrow the money This will _________ the size of the money multiplier?
A capital account surplus might be expected to cause a current account deficit because the associated ?