One of the most significant problems facing governments with low GDP is that a low GDP often results in

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Gunnar Reid

4 July, 17:28

One of the most significant problems facing governments with low GDP is that a low GDP often results in

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Draven Lin · Answer 1

One of the most significant problems facing governments with low GDP is that a low GDP often results in less available tax revenue.

Explanation:

An annual Gross Domestic Product (GDP) is an indication of the economic activity that takes place in a country. A combination of export, import, manufacturing, services etc.

A Country with a low GDP means that there is little economic acticity taking place. This also makes it difficult for tgovernmetns to raise enough income through taxes

Subequently, lower tax collection means that the government does not have enough money to spend on basic infrastructure, education or healthcare.

In order to make up for lost tax collections, these countries take loans and are heavily indebted. After a couple of years, these countries also have to pay back these loans.

All of this goes back to impact the overall GDP of the country and hence, they remain in a spiral of poverty finding it difficult to escape it.