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.
Report an error
The more specific you are, the faster it gets fixed. A source beats an opinion.
Prefer email? [email protected]
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
1,499 free Macroeconomics MCQs from Economics, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Discussion
Stuck on an option, or know a faster way to get there? Ask or explain it here.
No comments yet. Be the first to explain this one.
Exams that ask Economics questions like this
Economics is on 3 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
More Macroeconomics questions
Surplus labor theories assume that ?
During the 1980s and 1990s a period of economic conservative governments in much of West and Japan, a leading approach among development economists was ?
Which of the following was not a classical economist ?
According to the supply side of the vicious circle theory of development a country is poor because ?
One criticism of Rostow's theory of economic growth is that ?
Poor developing countries typically impose __________ tariffs than rich advanced nations on imports?