Describe the vicious circle of poverty.

The vicious circle of poverty is a problem common in some developing countries in which their low per-capita incomes are an obstacle to realizing the levels of savings and investment needed to achieve rates of growth of output that exceed their rates of population growth. This means that DVCs stay poor because they are poor. A poor family has little ability or incentive to save and their low incomes mean low levels of product demand. Further, there are low levels of investment in physical and human capital that leads to low labor productivity. Because output per person is low, real income per person is low, and as a consequence, per capita income is low.