Most of the DVCs Find It Difficult to Accumulate Capital

question 136

Multiple Choice

Most of the DVCs find it difficult to accumulate capital goods because

• A)the terms of trade prohibit the inflow of private capital from the advanced nations.
• B)it is very difficult to restrict consumption and thus to free resources for capital goods production.
• C)domestic monetary policies designed to achieve price stability result in low interest rates, thereby discouraging investment.
• D)investment is interest inelastic in DVCs.

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Definitions:

Input

Resources used in the production process of goods and services, including raw materials, labor, and capital.

Decreasing Returns

A concept in economics where each additional unit of input results in a progressively smaller increase in output, often observed in production processes.

Marginal Product

The additional output that is produced by using one more unit of a particular input while holding other inputs constant.

Factor

An element or component, such as land, labor, and capital, that is used in the production of goods and services.