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When an economy they’re to save all its extra income then investment calculation will be:
1
Uncertain
0
Infinite
- If an economy tries to save all its extra income, that means people are not spending, so consumption drops.
- In the simple Keynesian model, if everyone saves all extra income, consumption becomes zero.
- Since investment (in national income equilibrium) depends on savings being spent, no spending means firms have no incentive to invest.
- This results in actual investment being zero.
- Let's look at the options:
- Option 1: 1 – Implies investment remains 1. This is incorrect.
- Option 2: Uncertain – Investment is not uncertain; it can be calculated.
- Option 3: 0 – Correct. Investment will be zero because there's no demand.
- Option 4: Infinite – Investment cannot be infinite in this scenario.
By: santosh ProfileResourcesReport error
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