Homework 1 part 1 - 1 Part 1 20 questions worth 3 points...

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1. Part 1: 20 questions worth 3 points each for a total of 60 points. FOR FILL-IN-THE-BLANK questions: If your answer is in decimal form, round to 2 decimal places. For example, if your answer is .412, enter it into the fill-in-the-blank as .41, or if your answer is 1.415, enter it into the fill-in-the-blank as 1.42. If there are no decimals in your answer, you will simply enter the number; so if your answer is 2, enter 2 with no decimals. Do not enter any extra spaces, do not enter commas or $ or % symbols. Suppose the consumption function is: C = a 1 Y d + a 2 WRE/S + a 3 CC Where all the a’s (the sensitivity parameters) are greater than zero. Initial conditions: Let a 1 = 0.60, a 2 = 0.04, a 3 = 0.5, WRE/S = 18,000: CC = 90 Solve for C in terms of Y d . Select the correct equation below. A) C = 720 + .60 Y d B) C = 765 + .60 Y d C) C = 765 + .64 Y d D) C = 90 + .60 Y d E) None of the above are correct Table for Individual Question Feedback Points Earned: 3.0/3.0 Correct Answer(s): B 2. Use the equation you found in #1 and let Y d = 2000. C is equal to . Table for Individual Question Feedback Points Earned: 3.0/3.0 Correct Answer(s): 1965 3. Suppose that the stock market rallies so that WRE/S increases to 22,000. Additionally, consumer confidence (CC) rises to 100. Re-solve for C in terms of Y d . Select the correct equation below. 1965
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Table for Individual Question Feedback Points Earned: 3.0/3.0 Correct Answer(s): D 4. Now suppose disposable income (Y d ) falls due to a tax increase (Uncle Sam is trying to balance the budget) to 1800. Solve for the level of consumption using the equation you found in #3. Consumption (C) is equal to .
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