Suppose that every additional 3 percentage points in the investment rate boosts GDP growth by 1 percentage p Assume also that all investment must be financed with consumer saving. Note: Investment rate = Investment/GDP The economy is currently characterized by Consumption: $7 trillion Saving (= Investment): $2 trillion = GDP: $9 trillion If the goal is to raise the growth rate by 2 percentage points, a. by how much must investment increase? b. by how much must consumption decline? BILLIONS BILLIONS

Suppose that every additional 3 percentage points in the investment rate boosts GDP growth by 1 percentage p Assume also that all investment must be financed with consumer saving. Note: Investment rate = Investment/GDP The economy is currently characterized by Consumption: $7 trillion Saving (= Investment): $2 trillion = GDP: $9 trillion If the goal is to raise the growth rate by 2 percentage points, a. by how much must investment increase? b. by how much must consumption decline? BILLIONS BILLIONS

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Public Saving

Public saving deals with the amount which has been in excess after meeting all the obligatory expenses and investment of the government. Taxes are collected by the government to meet its day-to-day expenditures. The obligatory expenses include all those expenses which are mandatory for the government. It cannot be avoided as it is inevitable.

Question

Suppose that every additional 3 percentage points in the investment rate boosts GDP growth by 1 percentage poi
Assume also that all investment must be financed with consumer saving.
Note: Investment rate= Investment/GDP
The economy is currently characterized by
Consumption: $7 trillion
Saving (= Investment): $2 trillion
=
GDP: $9 trillion
If the goal is to raise the growth rate by 2 percentage points,
a. by how much must investment increase?
b. by how much must consumption decline?
PLEASE SHOW YOUR WORK.
BILLIONS
BILLIONS

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