Asked by Colin dunkley on Jul 25, 2024
Verified
What is the problem with saving in DVCs, even when saving as a percentage of domestic output is the same as in industrially advanced countries?
A) The interest rate paid on money kept in a bank in DVCs is not as high as the interest rate on money kept in a bank in an IAC.
B) Capital flight reduces investment opportunities and the need for saving in DVCs.
C) There is a continual brain drain that removes skilled labor from the work force and reduces labor productivity and the need for saving.
D) The domestic output of DVCs is so low that the absolute volume of saving is small.
Saving
The act of setting aside money for future use, rather than spending it immediately, typically to achieve a financial goal or prepare for emergencies.
Domestic Output
The total value of all goods and services produced within a country's borders within a given time period.
- Recognize the significance of saving rates and their implications for investment and growth in developing countries.
Verified Answer
RA
rania allabaniJul 25, 2024
Final Answer :
D
Explanation :
The issue with saving in Developing and Vulnerable Countries (DVCs) is that even if the saving rate as a percentage of domestic output matches that of industrially advanced countries, the overall lower level of domestic output in DVCs means that the absolute amount of savings generated is significantly smaller. This limits the funds available for investment and economic development.
Learning Objectives
- Recognize the significance of saving rates and their implications for investment and growth in developing countries.
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