What is marginal propensity to save. Q2,planned investment purchases.Q3 undergrouond economy?

Question

this are all macroeconomics questions and will answer within few minutes from now thank you

Answer 1

Marginal propensity to save is the ratio of the small change in Saving to the small (marginal) change in income that causes the savings to change. The marginal propensity to save of an individual whose income rises from $100 to $105 is 0.2 if he increases his savings by $1, for $1/$5= 0.2 If the poor households in the country save $1 billion out of an increase of &10 billio in their aggregate income from $500 billion to $510 billion, their marginal propensity on an average is 0.1($1billion/$10billion). In the context of macro economics if the disposable (after tax) GDP ( a broad measure of total income of the Nation) is Yd and the Saving of the Nation is S, the marginal propensity to save is given by the ratio of change in S divided by the change in Yd. Technically it is written as the first derivative of S with respect to Y or dS/dY.

If disposable income rises from Ydo to Yd1 and Saving rises from So to S1 as a consequence, marginal propensity to save is given by (S1-So)/(Yd1-Ydo). The average proensity to save or the average savings rate is So/Ydo before the change in income and S1/Yd1 at the new income levl of Yd1.

Planned (or, Ex Ante) Investment is the level of investment planned by businesses for the next planning period (say, a Year) to create additional capacity to produce for the future and hold additional inventories stocks in the future. However , Actual  (ex ante) Investment for the same period may be found to be equal to or higher/ lower the Planned Investment because of several reasons like delays in implementing projects for adding capaity or change in the cost of capital equipment from the planned estimates and the difference between actual invetiories held as compared with the planned inventires at the end of the period (because the actual demand turns out be higher/ lower than the forecast demand assumed in the Planning calculations and as a result inventories had to be accumulated or drwn down more than they were planned.

Underground Economy  consist of economic income/ employment generating activities like smugling, illegal drug trafficking, secret manufacturing units in unknown locations to supply arms to terrorists, corrupt use of power by ministers and officials taking bribes, bank robbery, etc. These activities are mostly illegal activities and the income gebnerated from these inciomes are not reported in the tax returns submitted to the tax authorities. Even some legally valid activities may be undertaken but the income earned may not be reported: like private coaching to children by school teachers against fees that are not included in their tax returns. These are called underground economy because these are done secretly, under cover and not reported.