Suppose that every additional 3 percentage points in the investment rate boosts GDPgrowth by 1 percentage point.Assume also that all investment must be financed with consumer saving.Note: Investment rate = Investment/GDPThe economy is currently characterized by$12 trillion$2 trillionConsumption:Saving (= Investment):GDP:$14 trillionIf the goal is to raise the growth rate by 2 percentage points,a. by how much must investment increase?billionb. by how much must consumption decline?: billion

Answer a) GivenInvestmtment = 2GDP = 14 so, Investment Rate = Investment/ GDP…

Suppose that every additional 3 percentage points in the investment rate boosts GDP growth by 1 percentage point. Assume also that all investment must be financed with consumer saving. Note: Investment rate = Investment/GDP The economy is currently characterized by Consumption: $12 trillion Saving (= Investment): $2 trillion GDP: $14 trillion If the goal is to raise the growth rate by 2 percentage points, a. by how much must investment increase? billion b. by how much must consumption decline? billion

Suppose that every additional 3 percentage points in the investment rate boosts GDP growth by 1 percentage point. Assume also that all investment must be financed with consumer saving. Note: Investment rate = Investment/GDP The economy is currently characterized by Consumption: $12 trillion Saving (= Investment): $2 trillion GDP: $14 trillion If the goal is to raise the growth rate by 2 percentage points, a. by how much must investment increase? billion b. by how much must consumption decline? billion

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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