Amount of investment needed to increase the economy by a particular percentage is
The investment required is \(\mathrm{ICOR}\times\Delta Y\). The incremental capital-output ratio is \(\mathrm{ICOR}\) \(=\Delta K/\Delta Y\), and investment adds to the…
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Amount of investment needed to increase the economy by a particular percentage is
Answer and explanation
Correct answer A
The investment required is . The incremental capital-output ratio is , and investment adds to the capital stock, so the required capital addition is . Here is the increase in output.
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Gujarat SET (GSET)