Question

They can't buy capital goods & can't save/buy them because they are poor______.

a) Poverty trap
b) Wealth accumulation
c) Economic growth
d) Social inequality

Answer 1

In low-income countries, people are unable to buy capital goods or save due to their poverty. This lack of saving leads to a lack of capital accumulation and a lack of loanable funds for investment in physical and human capital. This phenomenon is known as the poverty trap.

Step-by-step explanation:

In low-income countries, people often spend all their income on necessities such as food, which leaves them unable to save or buy capital goods. This lack of saving leads to a lack of capital accumulation and a lack of loanable funds for investment in physical and human capital. As a result, households in these economies are trapped in low incomes and unable to push themselves out of poverty. This phenomenon is known as the poverty trap.