1.Part 1: AE Problem (11 questions worth 3 points each for a total of 33 points). Suppose the initial conditions of the economy are characterized by the following equations in black font. We then shock the economy as shown in the red font.1) C = a0+ a1(Y-T) + a2(WSM) + a3(WRE) + a4(CC) + a5(r) 1’) C = a0+ a1(Y-200) + a2(10,000) + a3 (15,000) + a4(120) + a5(4)1’') C = a0+ a1(Y-200) + a2(12,000) + a3(15,000) + a4(160) + a5(4)2) I = b0+ b1AS + b2CF + b3(r) 2’) I = b0+ b1(140) + b2(1500) + b3(4)2’) I = b0+ b1(180) + b2(2000) + b3(4)3) G = G3’) G = 2004) X-M = X-M4’) X-M = -2004’) X-M = -4005) AE = C + I + G + X-MWhere: a0= 50, a1= .60, a2= .05, a3= .10, a4= .5, a5= -400, b0= 100, b1= .5, b2= .2, b3= -50Use the initial conditions above to get expressions for the Consumption function, Investment and the AE equation.Fill in the intercept and slope values to correctly complete the consumption function:C = + YTable for Individual Question FeedbackPoints Earned:3.0/3.0Correct Answer(s):Box 1: 390;Box 2: .6, 0.6, 0.60, .602.What is the value of Investment: I = Table for Individual Question FeedbackPoints Earned:3.0/3.0Correct Answer(s):2703.390.60270

Fill in the intercept and slope values to correctly complete the AE equation: AE = + YTable for Individual Question FeedbackPoints Earned:3.0/3.0Correct Answer(s):Box 1: 660;Box 2: .6, .60, 0.6, 0.604.

#### You've reached the end of your free preview.

Want to read all 6 pages?

- Fall '10
- staff
- Macroeconomics, Correct Answer, Inverse demand function, Individual Question, 15,000