Question

Which of the following would be most likely to encourage capital formation in a less -developed country?

a. The expectation of sustained high inflation.
b. The expectation that property rights will be highly secure in the years ahead.
c. The imposition of high tariffs and other restraints limiting imports.
d. Higher personal and corporate tax rates

Answer 1

The correct answer is option b. The option that would be most likely to encourage capital formation in a less-developed country is the expectation that property rights will be highly secure in the years ahead.

Step-by-step explanation:

The option that would be most likely to encourage capital formation in a less-developed country is the expectation that property rights will be highly secure in the years ahead. Property rights refer to the legal ownership and control of assets, and secure property rights provide individuals and businesses with the confidence and incentive to invest and accumulate capital. When property rights are highly secure, individuals and businesses are more willing to invest in long-term projects, as they have assurance that they will reap the benefits and returns from their investments.