Question

Post independence, people remained trapped in a vicious circle of poverty. Sort the factors that caused this.

• A. Low income
• B. Save and spend less
• C. No capital formation
• D. Less employment and income
• E. Low demand and production

Answer 1

When people have little income, they save less and spend less too. With low savings and low demand, there is less money for the industrialists to invest in their business. There would be a lack of tools, machines, and factories. In short, there would be a lack of capital formation, and that leads to lower production. It would lead to less employment and less income, and so the cycle would continue.