Economic Valuation Keynesian Investment

Question: Discuss about theEconomic Valuationfor Keynesian Investment. Answer: Table 1(GDP) 2007 2012 2017 2022 Without Investment GDP Deflator 1 0.68 1 1.316 Nominal GDP (($, bn) 1240 740 1325 1000 Real GDP (2017 prices, $, bn) 1240 1090 1325 760 With investment A Real (2017 prices) 525 B Real (2017 prices) 225 Proposal A is recommended as the real value of A is greater than that of B. No. Hyper inflation makes production costlier reducing the value of money. Required investment $738.4bn 2012 GDP = $2032bn, 2022 GDP = $1700bn Required investment = $2032(1+ 20%) = $738.4 Yes, because, project B is more prospective. MPC = DC/DY = (600 -500) / (2250 -990) = .079 MPS = 1- MPC = 0.92 Keynesian reasoning, Because, Keynesian investment is based on autonomous investment such as based on marginal efficiency of capital and rate of interest (Arrow and Kruz 2013) No, If all income is saved MPC would be zero. Then there would be no demand for investment and hence GDP may decrease in future (Lund 2014). References Arrow, K.J. and Kruz, M., 2013.Public investment, the rate of return, and optimal fiscal policy(Vol. 1). Routledge. Lund, P.J., 2014.Investment: The study of an economic aggregate(Vol. 13). Elsevier.