The diagram below shows alternate paths for two hypothetical economies, each starting with GDP of $1 billion. Assume that Area 1 is equal to Area 2. Real Conmption FIGURE 25-1 Area 1 Year X Area 2 Time Year Y Economy B 2% growth Economy A 1% growth W Refer to Figure 25-1. Suppose Economy A jumps to the path of Economy B at Year O by increasing the share of GDP that is saved. In that case, which of the following statements about Economy A is true? Oa. By jumping to a new growth path at Year 0, Economy A has increased the share of national income that is consumed. O b. By Year Y, the increase in consumption made possible by the economy's higher growth rate approximately equals the consumption sacrificed in earlier years. Oc By Year X, Economy A is saving and investing the same share of its national income as it would have been had it stayed on its original path Od Economy A will not be able to regain the losses in consumption it incurs by jumping to the path of Economy B By Year X Economy A is better off in terms of material living standards for having jumped to the path of Economy B

The diagram below shows alternate paths for two hypothetical economies, each starting with GDP of $1 billion. Assume that Area 1 is equal to Area 2. Real Conmption FIGURE 25-1 Area 1 Year X Area 2 Time Year Y Economy B 2% growth Economy A 1% growth W Refer to Figure 25-1. Suppose Economy A jumps to the path of Economy B at Year O by increasing the share of GDP that is saved. In that case, which of the following statements about Economy A is true? Oa. By jumping to a new growth path at Year 0, Economy A has increased the share of national income that is consumed. O b. By Year Y, the increase in consumption made possible by the economy's higher growth rate approximately equals the consumption sacrificed in earlier years. Oc By Year X, Economy A is saving and investing the same share of its national income as it would have been had it stayed on its original path Od Economy A will not be able to regain the losses in consumption it incurs by jumping to the path of Economy B By Year X Economy A is better off in terms of material living standards for having jumped to the path of Economy B

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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