Suppose that every additional 3 percentage points in the investment rate (I GDP) boosts GDP growth

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Suppose that every additional 3 percentage points in the investment rate (I ÷ GDP) boosts GDP growth by 1 percentage point. Assume also that all investment must be financed with consumer saving. The economy is now characterized by

Consumption:.........................$10 trillion

Saving(=Investment):...............$2 trillion

GST:.........................................$12 Trillion

If the goal is to raise the growth rate by 2 percentage points,

1. By how much must investment increase?

2. By how much must consumption decline?

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Essentials of Economics

ISBN: 978-1259235702

10th edition

Authors: Bradley Schiller, Karen Gebhardt

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Question Posted: Aug 30, 2017 11:56 PM

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Suppose that every additional 3 percentage points in the investment rate (I GDP) boosts GDP growth

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1 360 billion 2 360 billion Explanation 1 Each 3 percent increase in the investm...View the full answer

Essentials of Economics

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