Homework 01 Lessons 01 and 02 100 points This homework is composed of multiple choice, fill-in-the-blank and true/false questions. Select or enter your responses for each question. There is no time limit. It will be available for review starting the day after the assignment is due. Attempt History Attempt Time Score LATEST Attempt 1 3,446 minutes 93 out of 100 Correct answers will be available on Jan 22 at 11:59pm. Score for this quiz: 93 out of 100 Submitted Jan 19 at 10:43pm This attempt took 3,446 minutes. 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. Question 1 3 / 3 pts 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. C = 765 + .60 Y d C = 90 + .60 Y d C = 720 + .60 Y d C = 765 + .64 Y d None of these are correct Question 2 3 / 3 pts Use the equation you found in #1 and let Y d = 2000. C is equal to: 1 1965
Question 3 3 / 3 pts 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. C = 765 + .64 Y d C = 720 + .65 Y d C = 930 + .60 Y d None of these are correct C = 880 + .60 Y d Question 4 3 / 3 pts 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 question #3. Consumption (C) is equal to: Question 5 3 / 3 pts Now we will calculate the level of consumption that would have occurred if Uncle Sam did not raise taxes. In other words, use the equation you found in question 3, but keep Y d at its original value of 2000. Consumption (C) is equal to: Question 6 3 / 3 pts Look at the consumption values you calculated in #2 and #4. The percent change in consumption between those values is: _________% NOTE: There is no graphing component to be collected for this homework. However, you should be comfortable graphing the equations you found in #1 and #3. You should also be able to plot the points you found in #2, #4 and #5.