Exam 2 Econ 104 Penn - Part 1 70 points total You will need...

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Part 1 - 70 points total You will need to fill in the following exam sheet (see link below) for this part of your exam. You may either print out the exam sheet and complete it by hand, or type in/draw your answers in Word in the document itself. Directions for completing the exam sheet by hand : if you hand write the exam sheet, when you are done, you will need to scan and submit the sheet using the link at the end of this part of the exam. Directions for completing the exam sheet in Word : If you complete the exam sheet in Word you will need to save a copy of the file and submit it using the link at the end of this part of the exam. Download Exam Sheet 1 Part 1 C 1. Suppose the initial conditions of the economy are characterized by the following equations. In this problem, we assume that prices are fixed at 1 (the price index is 100 and when we deflate, we use 1.00) so that nominal wealth equals real wealth. 1) C = a 0 + a 1 (Y-T) + a 2 (WSM) + a 3 (WRE) + a 4 (CC) + a 5 (r) 1’) C = a 0 + a 1 (Y-400) + a 2 (10,000) + a 3 (15,000) + a 4 (100) + a 5 (4) 2) I = b 0 + b 1 AS + b 2 CF + b 3 (r) 2’) I = b 0 + b 1 (160) + b 2 (2000) + b 3 (4) 3) G = G 3’) G = 600 4) X-M = X-M 4’) X-M = -200 Where: a 0 = 300, a 1 = .50, a 2 = .06, a 3 = .10, a 4 = .8, a 5 = -200, b 0 = 500, b 1 = .5, b 2 = .5, b 3 = -100 Derive an expression for the consumption function and graph it on your exam sheet. Show all work. 2.
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Interpret a 2 and a 3 (i.e., what do they measure) and why are they so important in terms of measuring the impact of the Great Recession on consumption. HTML Editor 3. Why is a 3 larger than a 2 ? HTML Editor 4. Derive an expression for the aggregate expenditure curve and graph it on your exam sheet labeling this initial equilibrium output as point A. Also, add this point A to your consumption function. Show all work. Draw an aggregate demand and an aggregate supply curve in the right hand graph on your exam sheet identifying this initial point as point A.
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