A high Incremental Capital-Output Ratio (ICOR) indicates that an economy is highly efficient in converting capital investments into additional economic output.
- True
- False
Answer: False
ICOR measures the additional unit of capital required to produce one additional unit of output. Therefore, a low ICOR signifies high efficiency, advanced technology, and good infrastructure. Conversely, a high ICOR indicates inefficiency, structural bottlenecks, and poor capital utilization, meaning massive investments yield relatively little economic growth.