In response to the current Pandemic, Congress passed the CARES Act (Coronavirus Aid, Relief, and Economic Security Act). The Act includes government transfers to households, increases in unemployment benefits and several programs to aid firms. For this question, focus on the transfers to households. Assume that government spending on purchases has remainedconstant.

A)Carefully explain the impact of these household transfers to Savings, Investment and the real interest rate, if at all. If not, carefully explain why not.

B)Carefully explain the impact of the transfers from the CARES Act on real GDP and on each expenditure component.

C)Assume the marginal propensity to consume is 0.75 and that the cost of household transfers from the CARES Act is $800 billion. Calculate the impact on the National Savings.

D) Suppose the Pandemic also led to a reduction in TFP. Analyze the impacts on savings, investment and the real interest rate. (Continue assuming the Cares Act transfers are in place).

E)Assume that TFP is reduced by 10% and that real GDP was $20 trillion at the beginning of the pandemic. Compute the impact on investment that you discussed on the previous question. (Continue assuming the marginal propensity to consume is 0.75).

Describe the impact on real GDP and each of its expenditure components.