Multiple choice

The main reason for low growth rate in India, in spite of high rate of savings and capital formation, is

  1. high birth rate

  2. low level of foreign aid

  3. low capital output ratio

  4. high capital output ratio
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

The capital output ratio is used to produce an output over a period of time. This ratio has a tendency to be high when capital is cheap as compared to other inputs. For instance, a country with abundant natural resources can use its resources in lieu of capital to boost its output. Hence, the resulting capital output ratio is low.

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