Question

Give the kinds of propensity to investment.

Answer 1

1. Average propensity of invest: Average propensity to invest refers to the ratio of total investment to total income in an economy. It shows how much of the total income is being allocated toward investment.
   API = `I/Y`
2. Marginal propensity to invest: Marginal propensity to invest refers to the ratio of the change in investment to the change in income. It indicates how much additional investment is made for every additional unit of income earned.
   MPI = `(ΔI)/(ΔY)`