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Find incremental investment when equilibrium GDP increases by ₹50,000 and half of additional income is always saved in the economy.?
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Find incremental investment when equilibrium GDP increases by ₹50,000 ...
Incremental Investment when Equilibrium GDP Increases
When the equilibrium GDP in an economy increases by ₹50,000, it implies that there has been an increase in aggregate demand, leading to an increase in national income. In this scenario, we need to calculate the incremental investment in the economy.
Understanding the Marginal Propensity to Save
To determine the incremental investment, we first need to understand the concept of the marginal propensity to save (MPS). The MPS represents the proportion of additional income that an individual or the economy as a whole saves rather than spends. In this case, it is given that half of the additional income is saved in the economy. Therefore, the MPS would be 0.5 or 50%.
Formula for Incremental Investment
The incremental investment in an economy can be calculated using the following formula:
Incremental Investment = Change in Income * MPS
In this case, the change in income is ₹50,000 and the MPS is 0.5. Plugging in these values into the formula, we can calculate the incremental investment.
Calculating Incremental Investment
Incremental Investment = ₹50,000 * 0.5
Incremental Investment = ₹25,000
Therefore, the incremental investment when the equilibrium GDP increases by ₹50,000 and half of the additional income is saved in the economy is ₹25,000. This means that ₹25,000 of the additional income is invested in the economy, while the remaining ₹25,000 is saved.
Summary
- Incremental investment refers to the additional investment made in the economy when the equilibrium GDP increases.
- The marginal propensity to save (MPS) represents the proportion of additional income that is saved rather than spent.
- In this scenario, half of the additional income is saved, indicating an MPS of 0.5 or 50%.
- The incremental investment can be calculated using the formula: Incremental Investment = Change in Income * MPS.
- Plugging in the values, we find that the incremental investment is ₹25,000 when the equilibrium GDP increases by ₹50,000 and half of the additional income is saved in the economy.
When the equilibrium GDP in an economy increases by ₹50,000, it implies that there has been an increase in aggregate demand, leading to an increase in national income. In this scenario, we need to calculate the incremental investment in the economy.
Understanding the Marginal Propensity to Save
To determine the incremental investment, we first need to understand the concept of the marginal propensity to save (MPS). The MPS represents the proportion of additional income that an individual or the economy as a whole saves rather than spends. In this case, it is given that half of the additional income is saved in the economy. Therefore, the MPS would be 0.5 or 50%.
Formula for Incremental Investment
The incremental investment in an economy can be calculated using the following formula:
Incremental Investment = Change in Income * MPS
In this case, the change in income is ₹50,000 and the MPS is 0.5. Plugging in these values into the formula, we can calculate the incremental investment.
Calculating Incremental Investment
Incremental Investment = ₹50,000 * 0.5
Incremental Investment = ₹25,000
Therefore, the incremental investment when the equilibrium GDP increases by ₹50,000 and half of the additional income is saved in the economy is ₹25,000. This means that ₹25,000 of the additional income is invested in the economy, while the remaining ₹25,000 is saved.
Summary
- Incremental investment refers to the additional investment made in the economy when the equilibrium GDP increases.
- The marginal propensity to save (MPS) represents the proportion of additional income that is saved rather than spent.
- In this scenario, half of the additional income is saved, indicating an MPS of 0.5 or 50%.
- The incremental investment can be calculated using the formula: Incremental Investment = Change in Income * MPS.
- Plugging in the values, we find that the incremental investment is ₹25,000 when the equilibrium GDP increases by ₹50,000 and half of the additional income is saved in the economy.
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Find incremental investment when equilibrium GDP increases by ₹50,000 and half of additional income is always saved in the economy.?
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Find incremental investment when equilibrium GDP increases by ₹50,000 and half of additional income is always saved in the economy.? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Find incremental investment when equilibrium GDP increases by ₹50,000 and half of additional income is always saved in the economy.? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Find incremental investment when equilibrium GDP increases by ₹50,000 and half of additional income is always saved in the economy.?.
Find incremental investment when equilibrium GDP increases by ₹50,000 and half of additional income is always saved in the economy.? for Commerce 2024 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Find incremental investment when equilibrium GDP increases by ₹50,000 and half of additional income is always saved in the economy.? covers all topics & solutions for Commerce 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Find incremental investment when equilibrium GDP increases by ₹50,000 and half of additional income is always saved in the economy.?.
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