Despite being a high saving economy, capital formation may not result in significant increase in output due to
[UPSC Civil Services Exam – 2018 Prelims]
(a) weak administrative machinery
(b) illiteracy
(c) high population density
(d) high capital-output ratio
Answer: (d)
Explanation:
- Capital Output Ratio (COR) is a measure of the percentage increase in capital formation required to obtain a percentage increase in GDP.
- The capital-output ratio is the relationship between investment and resulting output over a period of time.
- COR is a measure of capital required for producing one unit of output.
- If capital to output ratio is high then capital formation may not result in a significant increase in the output.
