Question

Refer to the News Wire and answer one question. Suppose that every additional 3 percentage points in the investment rate boosts GDP growth by 1 percentage point. NEWS WIRE CURRENCY APPRECIATION Assume also that all investment must be financed with consumer saving Paris Just Got Cheaper for American Tourists Note: Investment rate = Investment GDP The economy is currently characterized by Consumption: Saving (= Investment): GDP: S6 trillion $1 trillion $7 trillion Paris, France. Americans may discover some bargains in Paris this summer. Since the beginning of the year, the U.S. dollar has strengthened considerably, making everything in Paris a bit cheaper. In February a dollar bought 0.80 euros, today, the same dollar is worth 0.88 euros. What does that mean for American tourists? Admission to the Eiffel Tower still costs 10 euros, but the dollar price has dropped from $12.50 to $11.36. Tickets to the Louvre museum (15 euros) have fallen from $18.75 to $17.05 for American tourists. And for big spenders, the fixed price of the gourmet lunch at Le Cinq has fallen from $250 to a mere S227. Vive la Paris! If the goal is to raise the growth rate by 1 percentage point, Source: Federal Reserve Board of Governors, August 2018. a. by how much must investment increase? billion b. by how much must consumption decline? billion By what percent did the dollar price of a euro fall between February and August 2018? percent World travelers have discovered that Big Macs taste pretty much the same everywhere, but a Big Mac's price can vary tremendously. If you want a Big Mac in a foreign country, you need to figure out foreign prices. Refer to the News Wire and answer the questions that follow. Use the following data related to the price of Big Macs and exchange rates around the world to see where the Big Mac was more or less expensive In 2015, NEWS WIRE CURRENCY APPRECIATION Paris Just Got Cheaper for American Tourists a Calculate the dollar price of a Big Mac in each of the following countries Instructions: Round your responses to two decimal places U.S. Dollar Country Exchange Rate (2015) Price Price of Big Mac in Foreign Currency (2015) 107.00 rubles Paris, France. Americans may discover some bargains in Paris this summer. Since the beginning of the year, the U.S. dollar has strengthened considerably, making everything in Paris a bit cheaper. In February a dollar bought 0.80 euros, today, the same dollar is worth 0.88 euros. What does that mean for American tourists? Admission to the Eiffel Tower still costs 10 euros, but the dollar price has dropped from $12.50 to $11.36. Tickets to the Louvre museum (15 euros) have fallen from $18.75 to $17.05 for American tourists. And for big spenders, the fixed price of the gourmet lunch at Le Cing has fallen from $250 to a mere $227. Vive la Paris! Russia 1 U.S. dollar = 5682 rubles Indonesia 27,939.00 rupiah Australia 5.30 Australian dollars 2,100.00 pesos 1 U.S. dollar = 12.480.00 rupiah 10.S. dollar 135 dollars 1 US dollar - 642.45 pesos Source: Federal Reserve Board of Governors, August 2018, Chile If an admission ticket to Disney World in Florida cost $116, what was the euro price of the ticket in a. February 2018? euros b. August 2018? euros b. The U.S. dollar price of a Big Mac was the highest in Click to select)

Answer 1

Answer to Question 1:

As per info given in the question above, for a growth of 1% in GDP the investment rate should increase by 3%.
Saving = Investment = $1 trillion.
GDP = $7 trillion.
Now, Investment Rate = Investment / GDP.

Thus, Present Investment Rate:
= 1/7 = 14.29%

A 3% increase means the New Investment Rate:
= 14.29% + 3% = 17.29%

Thus, Investments = 7 x 17.29% = $1.21 trillion.

And as stated above, Investments = Savings.
Thus, Savings = $1.21 trillion.

Increase in savings = 1.21 - 1 = $0.21 trillion

New Consumption = 6 - 0.21 = $5.79 trillion
(Consumption declines by the amount of increase in Savings)

Thus, answers to parts are as under:

a) By how much must investment increase? $0.21 trillion or 210 Billions.
b) By how much must consumption decline? $0.21 trillion or 210 Billions.

Note: As per Chegg answering policy, answer to only first question is mandatory. Please post other questions separately.