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Find incremental investment when equilibrium GDP increases by Rs 50,000 and half of additional income is always saved in the economy.
  • a)
    Rs 25,000
  • b)
    Rs 35,000
  • c)
    Rs 15,000
  • d)
    Rs 50,000
Correct answer is option 'A'. Can you explain this answer?
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Find incremental investment when equilibrium GDP increases by Rs 50,00...
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Find incremental investment when equilibrium GDP increases by Rs 50,00...
Incremental investment refers to the increase in investment that occurs as a result of an increase in equilibrium GDP. In this case, the equilibrium GDP has increased by Rs 50,000.

Given that half of the additional income is always saved in the economy, we can calculate the incremental investment using the savings-investment identity. The savings-investment identity states that savings (S) is equal to investment (I) in an economy.

Let's break down the problem and calculate the incremental investment step by step:

Step 1: Determine the increase in savings
Since half of the additional income is saved, the increase in savings (ΔS) is half of the increase in equilibrium GDP.
ΔS = (1/2) * Rs 50,000
ΔS = Rs 25,000

Step 2: Determine the incremental investment
Since savings and investment are equal, the incremental investment (ΔI) is equal to the increase in savings.
ΔI = ΔS = Rs 25,000

Therefore, the incremental investment when equilibrium GDP increases by Rs 50,000 and half of the additional income is always saved in the economy is Rs 25,000.

Therefore, the correct answer is option 'A' (Rs 25,000).
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Find incremental investment when equilibrium GDP increases by Rs 50,000 and half of additional income is always saved in the economy.a)Rs 25,000b)Rs 35,000c)Rs 15,000d)Rs 50,000Correct answer is option 'A'. Can you explain this answer?
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