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}^{= 0.65, a}_{2}^{= 0.04, a}_{3}^{= 0.5, } WRE/S = 18,000: CC = 70 Solve for C in terms of Y_{d}^{.}
Select the correct equation.
C = 685 + .64 Y_{d}
C = 765 + .60 Y_{d}
None of these are correct
C = 755 + .65 Y_{d}
C = 70 + .65 Y_{d}
Question 2 3 / 3 pts Use the equation you found in #1 and let Y_{d} = 2000. C is equal to:
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 120. Re-solve for C in terms of Y_{d} . Select the correct equation.
2055
None of these are correct
C = 930 + .60 Y_{d }
C = 980 + .64 Y_{d }
C = 830 + .65 Y_{d}
C = 940 + .65 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.
2110
2240
2.68
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.
Question 7 3 / 3 pts
Use the table below for questions 7 & 8.
Let’s consider some data on consumption and disposable income from the Federal Reserve Database (measured in billions of dollars)
Real Personal Consumption
Expenditures
Real Disposable
Personal Income
January 1, 1995
6442.9 7190.9
January 1, 2018
12061.0 12940.5
The percent change in consumption between 1/1/95 and 1/1/18 is: _______%.