# CH1.docx - Question 1 3 3 pts Suppose the consumption...

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Question 13 / 3 ptsSuppose the consumption function is: C = a1 Yd + a2 WRE/S + a3CC Where all the a’s (the sensitivity parameters) are greater than zero. Initial conditions: Let a1 = 0.60, a2 = 0.04, a3 = 0.5,WRE/S = 18,000: CC = 90 Solve for C in terms of Yd.Select the correct equation.None of these are correctCorrect!C = 765 + .60 YdC = 90 + .60 YdC = 765 + .64 YdC = 720 + .60 Yd
Question 23 / 3 ptsUse the equation you found in #1 and let Yd = 2000. C is equal to:
Question 33 / 3 ptsSuppose that the stock market rallies so that WRE/S increases to 22,000. Additionally, consumerconfidence (CC) rises to 100. Re-solve for C in terms of Yd. Select the correct equation.
Question 43 / 3 ptsNow suppose disposable income (Yd) 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:Correct!