Suppose that every additional four percentage points in the investment rate (I GDP) boost economic growth
Question:
Suppose that every additional four percentage points in the investment rate (I ÷ GDP) boost economic growth by one percentage point. Assume also that all investment must be financed with consumer saving. The economy is now assumed to be fully employed at
GDP.........................................$8 trillion
Consumption...........................6 trillion
Saving.......................................1 trillion
Investment...............................1 trillion
If the goal is to raise the growth rate by 1 percent,
(a) By how much must investment increase?
(b) By how much must consumption decline for this to occur?
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Related Book For
The Macro Economy Today
ISBN: 978-1259291821
14th edition
Authors: Bradley R. Schiller, Karen Gebhardt
Question Posted: