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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

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The investment required is ICOR×ΔY\mathrm{ICOR}\times\Delta Y. The incremental capital-output ratio is ICOR\mathrm{ICOR} =ΔK/ΔY=\Delta K/\Delta Y, and investment adds to the capital stock, so the required capital addition is ΔK\Delta K =ICOR×ΔY=\mathrm{ICOR}\times\Delta Y. Here ΔY\Delta Y is the increase in output.

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  • Gujarat SET (GSET)

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