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Answer» Economic effects of poverty: - Low national income: As a substantial number of people are poor, their income, saving, and investment are inadequate. This results in low capital formation.
- Adverse effect on production: Since the capital for modernization is not available, the farmers continue with the outdated methods. Similarly, the industry does not have funds for modernization.
- Misallocation of resources: To help the poor, the government spends a huge amount on welfare activities. This restricts the allocation of resources for productive activities.
- Low standard of living: Due to low per capita income and low per capita consumption, people are forced to live in slums. This is reflected in the low standard of living.
- Malnutrition and starvation: Poor people can not afford a balanced diet due to low income. They do not get the minimum calories from their diet.
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