Income:
What wealth yields called income. Income is
possible if wealth is there. Hence wealth is pre-requisite for income. Income
may be money income and real income. When income expressed it terms of money,
called money income. But real income refers to goods and services that a person
purchases with his money income. Real income depends upon prices. Real income
is inversely related with prices.
Savings:
Saving
refers to the excess of income over consumption. A person consumes some part of
his current income and after it whatever income remains in his hands it is
called saving.
Investment:
Investment means an addition made to the
physical stock of capital i.e. amount utilized for constructing building, dam,
new factory etc.
I =
Investment, Y = Income, S = Savings, C = consumption
1. Y = C + S 2. S = Y-C 3. C = Y – S
4. Y = C + I , Provided S = I
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