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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 nanced with consumer saving. No to: investment rate = Investment/GDP The economy is currently characterized by Consumption: $8 trillion Saving (= Investment): $2 trillion GDP: $10 trillion If the goal is to raise the growth rate by 2 percentage points, a. by how much must investment increase? :l billion b. by how much must consumption decline? 5 billion
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