Economics • Economic BasicsMedium
In national income accounting, what does the Incremental Capital-Output Ratio (ICOR) measure?
A. The amount of additional capital required to produce one additional unit of output✓ Correct Answer
B. The ratio of total consumer spending to national savings
C. The percentage change in output resulting from a depreciation of currency
D. The total financial outlay required to maintain existing infrastructure
💡 Solution & Explanation
The Incremental Capital-Output Ratio measures the additional capital investment required to generate one additional unit of output. A lower ratio signifies higher capital efficiency in an economy, whereas a higher ratio indicates inefficiency. It does not measure consumer savings or currency depreciation impacts.
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