Which of the following factors would be most likely to encourage capital formation in a less-developed nation?
A) High and variable rates of inflation.
B) Tariffs and quotas that restrict international trade.
C) A legal system that provides for secure property rights and even-handed enforcement of contracts.
D) High marginal tax rates.

Question

Quizplus · Accepted Answer

A legal system that provides for secure property rights and even-handed enforcement of contracts would encourage capital formation as it provides a stable and secure environment for investment. High and variable rates of inflation would discourage savings and investment. Tariffs and quotas that restrict international trade would discourage foreign investment and limit access to new markets. High marginal tax rates would discourage investment and reduce the overall amount of capital available for investment.

Which of the Following Factors Would Be Most Likely to Encourage