Question:
The ‘middle income trap’ refers to a situation where
(1) a country cannot escape poverty and unemployment.
(2) a country faces inflationary pressure as it transitions to middle-income status.
(3) a country struggles to grow after reaching middle-income levels, failing to transition to high-income status.
(4) the lack of skilled labour hinders progress to a high-income status.
(5) economic growth is limited due to low levels of foreign direct investment and high inflation.
Correct Answer:
(3)
Answer Explanation:
The “middle-income trap” is a widely recognized developmental phenomenon where a rapidly growing economy reaches middle-income status but then stagnates. It loses its competitive edge in export-driven low-wage manufacturing but fails to build the high-tech, innovation-driven sectors required to break into the high-income tier.
Topic: Economic Development Year: 2024
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