Question

Despite being a high saving economy, capital formation may not result in significant increase in output due to

• A. weak administrative machinery
• B. illiteracy
• C. high population density
• D. high capital-output ratio

Answer 1

The correct option is D high capital-output ratio

Capital output ratio is the amount of capital needed to produce one unit of output. High Capital-Output ratio means large amount of capital is needed to produce one unit of output.

So inspite of savings being high, if there is high capital-output ratio, growth will be limited.