Consumption and Investment Functions — Economics STD 12 — Question
Tamilnadu BoardEnglish MediumSTD 12EconomicsConsumption and Investment Functions3 Marks
Question
Write the “Leverage Effect” and Equation Explanation?
✓
Answer
Leverage Effect:
The combined effect of the multiplier and the accelerator is also called the leverage effect which may lead the economy to very high or low level of income propagation.
Symbolically
$Y=C+I_{A}+I_{P}$
$Y=\text { Aggregate income }$
$C=\text { Consumption expenditure }$
$T=\text { autonomous investment; } I_{P}=\text { induced private investment }$
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