The vicious circle of poverty makes it difficult for an LDC to:
A) establish political institutions.
B) control inflation.
C) save and invest.
D) fix its exchange rate.

Question

Quizplus · Accepted Answer

The vicious circle of poverty refers to the cycle where a lack of resources and investment leads to low productivity and income, which in turn leads to low savings and investment. This cycle makes it difficult for an LDC to save and invest, which constrains economic growth and development. While establishing political institutions and fixing exchange rates can also be challenges for an LDC, these issues are not necessarily directly linked to the vicious circle of poverty. Controlling inflation can become easier once an LDC is able to break out of the cycle of poverty and achieve sustained economic growth.

The Vicious Circle of Poverty Makes It Difficult for an LDC