Homework 01_ Econ 104 WC Sec 1 Spring 2019.pdf

# Homework 01_ Econ 104 WC Sec 1 Spring 2019.pdf - Homework...

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1/20/2019 Homework 01: Econ 104 WC Sec 1 Spring 2019 2/19 3 / 3 pts Question 1 Suppose the consumption function is: C = a Y + a WRE/S + a CC Where all the a’s (the sensitivity parameters) are greater than zero. Initial conditions: Let a = 0.65, a = 0.04, a = 0.5, WRE/S = 18,000: CC = 70 Solve for C in terms of Y . Select the correct equation. 1 d 2 3 1 2 3 d C = 765 + .60 Y d C = 70 + .65 Y d C = 755 + .65 Y d C = 685 + .64 Y d None of these are correct 3 / 3 pts Question 2 Use the equation you found in #1 and let Y = 2000. C is equal to: d 2055 3 / 3 pts Question 3 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 . Select the correct equation. d None of these are correct
1/20/2019 Homework 01: Econ 104 WC Sec 1 Spring 2019 3/19 C = 930 + .60 Y d C = 940 + .65 Y d C = 830 + .65 Y d C = 980 + .64 Y d 3 / 3 pts Question 4 Now suppose disposable income (Y ) 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: d 2110 3 / 3 pts Question 5 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 at its original value of 2000. Consumption (C) is equal to: d 2240 3 / 3 pts Question 6 Look at the consumption values you calculated in #2 and #4. The percent change in consumption between those values is: _________%

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1/20/2019 Homework 01: Econ 104 WC Sec 1 Spring 2019 4/19 NOTE: There is no graphing component to be collected for this homework.
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