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UPSC 2018: Despite being a high saving economy, capital formation may not result in significant increase in output due to
(a)weak administrative machinery
(b)illiteracy
(c)high population density
(d)high capital-output ratio
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Not attemptedCorrect Answer: (d) high capital-output ratio
Even when an economy saves and invests a lot, output will rise only if a given quantum of capital can generate sufficient additional production. A high capital–output ratio (ICOR) means many units of capital are required to produce one unit of output, so extra capital formation yields only a small output increment. The other factors listed do not directly measure the productivity of capital and therefore cannot explain the phenomenon asked in the question. ([compass.rauias.com](https://compass.rauias.com/quiz/despite-being-a-high-saving-economy-capital-formation-may-not-result-in-significant-increase-in-output-due-to/?utm_source=openai))
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Frequently Asked Questions
What is the correct answer to this UPSC 2018 Indian Economy question?▼
The correct answer is option (d): high capital-output ratio. Watch the detailed video explanation in our Sherlocking Prelims course on UnlockIAS.
Which year was this National Income & Economic Growth question asked in UPSC Prelims?▼
This question was asked in UPSC CSE Prelims 2018, GS Paper 1, as Question 50. It falls under Indian Economy > National Income & Economic Growth.
What is the difficulty level of this UPSC question?▼
This question is rated "easy". It tests basic recall and most well-prepared aspirants should answer it correctly.
How many UPSC Prelims questions have been asked from National Income & Economic Growth?▼
UPSC has asked 37 questions from National Income & Economic Growth (under Indian Economy) across multiple years. Visit the topic page to see the full list and year-wise trends.