Question: Hi, could you please help me on this question? In 2019 UK output was approximately $2 trillion (E2x10^12). Take the average tax rate on output

Hi, could you please help me on this question?

In 2019 UK output was approximately $2 trillion (E2x10^12). Take the average tax rate on output as 40% and the MPC as 35% (around the middle of estimates in the literature). The impact of Covid 19 caused the savings ratio to increase from 5% to 30%, which we can model as a fall in autonomous consumption from 720 billion to 456 billion Pounds. (a) Draw a diagram which represents the impact of the Covid shock to consumption. (2 marks)(b) Calculate the combined contribution of Investment and Government purchases to Aggregate Demand prior to the impact of the shock. (2 marks)(c) Calculate the fall in output implied by this model of the reduction in autonomous consumption due to the Covid shock. You may work to 3 significant figures (i.e., round your answer to the nearest billion). (4 marks)

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