# Homework 1.docx - Part 1: 20 questions worth 3 points each...

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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 decimalplaces. For example, if your answer is .412, enter it into the fill-in-the-blank as .41, or if youranswer 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 enterany extra spaces, do not enter commas or \$ or % symbols.Question 13 / 3 ptsSuppose the consumption function is: C = a1Yd+ a2WRE/S + a3CC Where all the a’s (thesensitivity parameters) are greater than zero. Initial conditions: Let a1= 0.65, a2= 0.04, a3= 0.5,WRE/S = 18,000: CC = 70Solve for C in terms of Yd.Select the correct equation.C = 685 + .64 YdC = 765 + .60 YdNone of these are correctC = 755 + .65 YdC = 70 + .65 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 120. 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 balancethe budget) to 1800. Solve for the level of consumption using the equation you found in question#3. Consumption (C) is equal to:Question 53 / 3 ptsNow we will calculate the level of consumption that would have occurred if Uncle Sam did notraise taxes. In other words, use the equation you found in question 3, but keep Ydat its originalvalue of 2000. Consumption (C) is equal to:Question 63 / 3 ptsLook at the consumption values you calculated in #2 and #4. The percent change in consumptionbetween those values is: _________%NOTE:There is no graphing component to be collected for this homework. However, youshould be comfortable graphing the equations you found in #1 and #3. You should also be able toplot the points you found in #2, #4 and #5.

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