The graph shows the output function, savings function, and depreciation function for an economy. Show what happens when he investment rate decreases by half by shifting the appropriate curve or curves in the graph.

Principles of Economics 2e
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ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter7: Production, Costs, And Industry Structure
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The graph shows the output function, savings function, and depreciation function for an economy. Show what happens when
the investment rate decreases by half by shifting the appropriate curve or curves in the graph.
Output (Y)
20
19
18
17
16
15
14
13
12
11
10
9
8
7
6
5
4
3
2
1
Output function
Depreciation function
Savings function
0
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Capital (K)
What is the savings rate before the change? Answer to
two decimal places.
savings rate: .5
units
In the long run, what happens to consumption in the
economy when people are saving less?
increases
decreases
O remains the same
O cannot tell from the graph
Transcribed Image Text:The graph shows the output function, savings function, and depreciation function for an economy. Show what happens when the investment rate decreases by half by shifting the appropriate curve or curves in the graph. Output (Y) 20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 Output function Depreciation function Savings function 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Capital (K) What is the savings rate before the change? Answer to two decimal places. savings rate: .5 units In the long run, what happens to consumption in the economy when people are saving less? increases decreases O remains the same O cannot tell from the graph
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