Explain the vicious circle of poverty with the help of a diagram.
Solution:
Vicious circle of poverty implies that poverty is the cause of poverty.
A poor person, in order to repay his existing debt, will borrow some more, thereby adding to his debt. Further, he will also incur interest payment obligations. This will only increase his total amount of debt. He is also likely to pass on this debt to his children, who will remain caught in this poverty trap. Poor people tend to remain poor and pass on the poverty situation to the future generations.
It is a situation where the people in the less developed countries have low per capita income. Having low income their rate of savings is low. which leads to less productivity due to which an economy gets trap in circle of poverty.
