Which of the Following Describes the Vicious Circle of Poverty

question 119

Multiple Choice

Which of the following describes the vicious circle of poverty?

• A) Government spending for public goods is inflationary, and this undermines incentives to save and invest.
• B) Higher incomes increase consumption at the expense of capital accumulation, which causes income to fall.
• C) Low per capita incomes cause low levels of saving and investment, which mean low productivity and therefore low incomes.
• D) A growing national income increases the demand for money, which increases the interest rate and reduces investment.

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Definitions:

Producer Surplus

The difference between the amount a producer is willing to accept for a good and the actual amount received due to higher market price.

Consumer Surplus

The discrepancy between the potential total expenditure consumers are willing to make on a good or service and the actual costs they incur.

Government Revenue

The total income received by the government from various sources, including taxes, fees, fines, and the sale of goods and services.

Domestic Demand Curve

A graphical representation of the quantity of goods and services demanded by domestic consumers at various price levels.