Question

Which of the following provides the best explanation of why low-income countries generally remain poor? a. Their institutional arrangements and policies often discourage productive activity and reduce the potential gains from specialization and exchange. b. They are oppressed by developed nations that benefit from the cheap goods available from countries with low wage rates. c. They are poorly endowed with natural resources, which are essential for long-term rapid growth. d. When the average income level is low, workers have little incentive to earn higher incomes.

Answer 1

Answer: a.

Their institutional arrangements and political policies often discourage productive activity and reduce the potential gains from specialisation and exchange.

Explanation: low income countries often form weak institutions which are not properly formed to effective improve productivity within it's economy, Political structures in most of the low income countries are either improperly founded or established without a well cut out framework.Hence, this weak institutions and improperly instituted political structures makes it difficult for specialisation and exchange programs or activities.

Specialisation helps to improve efficiency within an economy which helps economies to identity and improve on its strengths which can either be it's Human and or natural resources.