3. Suppose that investment as a fraction of output in the United States rises permanently from 0.15 to 0.18. Assume that capital's share is (a) By about how much does output eventually rise relative to what it would have been without the rise in investment? (b) By about how much does consumption rise relative to what it would have been without the rise in investment? (c) What is the immediate effect of the rise in investment on consumption? About how long does it take for consumption to return to

30

Let's assume that prices substantially increased over the past year. How do you expect this will affect people's buying behavior? Be sure to tie this back to economic concepts discussed in this course. Time Atten 33 M.

Suppose two successive levels of disposable personal income are $13.8 and $18.8 billion, respectively, and the change in consumption spending between these two levels of disposable personal income is $3.65 billion, then the MPS will be equal to O 0.25 O 0.27 O 0.35 O 0.65 O 0.73