{"id":91575,"date":"2025-06-01T11:00:18","date_gmt":"2025-06-01T11:00:18","guid":{"rendered":"https:\/\/exam.pscnotes.com\/mcq\/?p=91575"},"modified":"2025-06-01T11:00:18","modified_gmt":"2025-06-01T11:00:18","slug":"despite-being-a-high-saving-economy-capital-formation-may-not-result","status":"publish","type":"post","link":"https:\/\/exam.pscnotes.com\/mcq\/despite-being-a-high-saving-economy-capital-formation-may-not-result\/","title":{"rendered":"Despite being a high saving economy, capital formation may not result"},"content":{"rendered":"

Despite being a high saving economy, capital formation may not result in significant increase in output due to<\/p>\n

[amp_mcq option1=”weak administrative machinery” option2=”illiteracy” option3=”high population density” option4=”high capital-output ratio” correct=”option4″]<\/p>\n

\n
\n
This question was previously asked in<\/div>\n
UPSC IAS – 2018<\/div>\n<\/div>\n
Download PDF<\/a>Attempt Online<\/a><\/div>\n<\/div>\n
\nThe correct answer is D) high capital-output ratio.
\n<\/section>\n
\nThe capital-output ratio (COR) is an economic metric that describes the relationship between the amount of capital invested in an economy and the amount of output it produces. A high COR indicates that a large amount of capital is required to produce a given increase in output.
\n<\/section>\n
\nIn a high-saving economy, a significant portion of national income is saved and potentially converted into investment (capital formation). However, if the economy suffers from a high capital-output ratio, the efficiency of converting this capital investment into actual output growth is low. This can happen due to various reasons like inefficient investment allocation, long gestation periods of projects, poor infrastructure, technological backwardness, or structural rigidities, all of which make each unit of capital less productive in generating output. Therefore, high savings and capital formation might not translate into a proportionally high increase in output if the capital-output ratio is high.
\n<\/section>\n","protected":false},"excerpt":{"rendered":"

Despite being a high saving economy, capital formation may not result in significant increase in output due to [amp_mcq option1=”weak administrative machinery” option2=”illiteracy” option3=”high population density” option4=”high capital-output ratio” correct=”option4″] This question was previously asked in UPSC IAS – 2018 Download PDFAttempt Online The correct answer is D) high capital-output ratio. The capital-output ratio (COR) … <\/p>\n

Detailed SolutionDespite being a high saving economy, capital formation may not result<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1092],"tags":[1114,1120,1261],"class_list":["post-91575","post","type-post","status-publish","format-standard","hentry","category-upsc-ias","tag-1114","tag-economic-development","tag-nature-of-indian-economy","no-featured-image-padding"],"yoast_head":"\nDespite being a high saving economy, capital formation may not result<\/title>\n<meta name=\"description\" content=\"The correct answer is D) high capital-output ratio. The capital-output ratio (COR) is an economic metric that describes the relationship between the amount of capital invested in an economy and the amount of output it produces. 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