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answerstohomework5spring2007 - Economics 102 Answers to...

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Economics 102 Answers to Homework #5 Spring 2007 Due 02/06/2007 in lecture Directions: The homework will be collected in a box before the lecture. Please place your name , TA name and section number on top of the homework (legibly). Make sure you write your name as it appears on your ID so that you can receive the correct grade. Please remember the section number for the section you are registered in, because you will need that number when you submit exams and homework. Late homework will not be accepted so make plans ahead of time. Good luck! Given the following model of a closed economy: Y C S T = + + ( ) 10 0.7( ) C a b Y T Y T = + - = + - Where Y: GDP, T: tax, Y-T: disposable income, C: aggregate consumption, S: aggregate saving a: autonomous consumption, b: marginal propensity to consume Also, assume there is no foreign sector and that government spending equals $0. 1) Given the information in the table, fill the blanks using the model described above, and solve for the consumption function.
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