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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 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 = a1Yd+ a2WRE/S + a3CC Where all the a’s (the sensitivity parameters) are greater than zero. Initial conditions: Let a1= 0.65, a2= 0.04, a3= 0.5, WRE/S = 18,000: CC = 70 Solve 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 YdQuestion 2 3 / 3 pts Use the equation you found in #1 and let Yd= 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
Question 4 3 / 3 pts Now 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: 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 Ydat 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 consumptionbetween 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 toplot the points you found in #2, #4 and #5.