Question

Q. Which of the following statements is/are correct about Incremental Capital Output Ratio (ICOR)?

Select the correct code from the options given below:

• A. 1 only
• B. 2 only
• C. Both 1 and 2
• D. None of the above

Answer 1

The correct option is B 2 only

Explanation:

• Statement 1 is incorrect. It is the relationship between the level of investment made in the economy and the consequent increase in GDP.
• Statement 2 is correct. Countries prefer lower ICOR. ICOR indicates the additional unit of capital or investment needed to produce an additional unit of output. A lower ICOR is preferred as it indicates a country's production is more efficient.