Suppose that every additional 5 percentage points in the investment rate (I + GDP) boost economic growth by 1 percentage point. Assume also that all investment must be financed with consumer saving. The economy is now characterized by GDP: $10 trillion Consumption: Saving: Investment: 9 trillion 1 trillion 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?

(c) Are consumers better or worse off as a result? L03