The Diagram Below Shows Alternate Paths for Two Hypothetical Economies,each

question 99

Multiple Choice

The diagram below shows alternate paths for two hypothetical economies,each starting with GDP of $1 billion.Assume that Area 1 is equal to Area 2. FIGURE 25-1 Refer to Figure 25-1.Suppose Economy A jumps to the path of Economy B at Year 0 by increasing the share of GDP that is saved.In that case,which of the following statements about Economy A is true?

• A)Economy A will not be able to regain the losses in consumption it incurs by jumping to the path of Economy B.
• B)By Year Y,the increase in consumption made possible by the economy's higher growth rate approximately equals the consumption sacrificed in earlier years.
• C)By Year X,Economy A is better off in terms of material living standards for having jumped to the path of Economy B.
• D)By jumping to a new growth path at Year 0,Economy A has increased the share of national income that is consumed.
• E)By Year X,Economy A is saving and investing the same share of its national income as it would have been had it stayed on its original path.

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