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    Question

    In development economics, “poverty trap” refers to:

    A Excessive government intervention Correct Answer Incorrect Answer
    B High unemployment in industrial sector Correct Answer Incorrect Answer
    C Inequality caused by taxation Correct Answer Incorrect Answer
    D Low income causing low savings and low investment, keeping the economy poor Correct Answer Incorrect Answer

    Solution

    A poverty trap occurs when low income prevents savings and investment, limiting capital accumulation. Without external intervention or coordinated policies, the economy remains stuck in low-level equilibrium indefinitely.

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