The constant extraneous variables such as income distribution, tastes, habits, social customs, price movements, population growth, etc. do not change and consumption depends on income alone.

(i) The Average Propensity to Consume \(\frac { c }{ y } \)
(ii) The Marginal Prosperity to Consume =\(\frac { \triangle c }{ \triangle y } \)
(iii) The average Propensity to Save =\(\frac { s }{ y } \)
(iv) The Marginal Propensity to Save =\(\frac { s }{ y } \)

(i) Investment has a specific meaning in economics.
(ii) It means additions to the existing productive capacities (stock of capital and inventories).

(i) Saving is consumption forgone.
(ii) The portion of the income not spent on consumption is saving.
(iii) If saving rises, consumption will fall.

(i) The multiplier assumes that those who earn income are likely to spend a proportion of their additional income on consumption.
(ii) In practice, people tend to spend their additional income on other items
(iii) Such expenses are known as leakages.

(i) Monetary and fiscal policy
(ii) Technological progress
(iii) Resource availability.

Autonomous investment is the expenditure on capital formation, which is independent of the change in income, rate of interest or the rate of profit.

The term investment means purchase of stocks and shares, debentures, government bonds and equities.

(i) Tax Multiplier
(ii) Employment Multiplier
(iii) Foreign Trade Multiplier
(iv) Investment Multiplier

Induced investment is the expenditure on fixed assets and stocks which are required when level of income and demand in an economy goes up.

(i) Autonomous Investment
(ii) Induced Investment

(i) Ceteris paribus (constant extraneous variable).
(ii) Existence of Normal conditions.
(iii) Existence of a Laissez-faire capitalist economy.

Formula for calculating APC =\(\frac{C}{Y}\) x 100
= \(\frac{120}{120}\) x = 1 x 100
∴ APC = 100