What are the contributions of consumption and investment

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Suppose that consumption spending accounts for about 60 percent of GDP on average, while investement and government purchases each account for 20 percent of GDP on average. (Assume that this country has no foreign trade, so exports and imports are zero). Suppose that in 2018, consumption falls by 2 percent, investements rises by 20 percent, and government purchases fall by 5 percent. What will happen to real GDP in 2018, and what are the contributions of consumption, investment and government purchases to the growth in real GDP?

Reference no: EM131244242

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