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Suppose that every additional 3 percentage points in the investment rate boosts GDP growth by 1 percentage point. Assume also that all investment must be
Suppose that every additional 3 percentage points in the investment rate boosts GDP growth by 1 percentage point. Assume also that all investment must be financed with consumer saving.
Investment rate = investment GDP.
The economy is now characterized by.
Consumption: | $ 10 trillion |
---|---|
Saving (= Investment): | $ 2 trillion |
GDP: | $ 12 trillion |
Instructions: Enter your responses as a whole number.
If the goal is to raise the growth rate by 2 percentage points,
- by how much must investment increase?
$ billion
- by how much must consumption decline?
$ billion
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