Which of the following would be most likely to encourage capital formation in a less-developed country?
A) The expectation of sustained high inflation.
B) The expectation that property rights will be highly secure in the years ahead.
C) The imposition of high tariffs and other restraints limiting imports.
D) Higher personal and corporate tax rates.

Question

Quizplus · Accepted Answer

The expectation that property rights will be highly secure in the years ahead can encourage capital formation in a less-developed country because it provides investors with assurance that their investments will be protected and not subject to unjust confiscation or expropriation. This can provide the necessary stability and confidence for investors to commit more capital to the country's development. Options A, C, and D would all have the opposite effect and discourage capital formation.

Which of the Following Would Be Most Likely to Encourage