Question 1
3 / 3 pts
Part 1: AE Problem (11 questions worth 3 points each for a total of 33 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.
Suppose the initial conditions of the economy are characterized by the following equations in black
font. We then shock the economy as shown in the
red font
.
1) C = a
0
+ a
1
(Y-T) + a
2
(WSM) + a
3
(WRE) + a
4
(CC) + a
5
(r)
1’) C = a
0
+ a
1
(Y-200) + a
2
(10,000) + a
3
(15,000) + a
4
(120) + a
5
(3)
1’') C = a
0
+ a
1
(Y-200) + a
2
(12,000) + a
3
(15,000) + a
4
(160) + a
5
(3)
2) I = b
0
+ b
1
AS + b
2
CF + b
3
(r)
2’) I = b
0
+ b
1
(140) + b
2
(1500) + b
3
(3)
2’) I = b
0
+ b
1
(180) + b
2
(2000) + b
3
(3)
3) G = G
3’) G = 200
4) X-M = X-M
4’) X-M = -200
4’) X-M = -400
5) AE = C + I + G + X-M
Where: a
0
= 50, a
1
= .80, a
2
= .05, a
3
= .10, a
4
= .5, a
5
= -400, b
0
= 100, b
1
= .5, b
2
= .2, b
3
= -50
Use the initial conditions above to get expressions for the Consumption function, Investment
and the AE equation.
Fill in the intercept and slope values to correctly complete the consumption function:
C =
+ Y
Answer 1:
750
Answer 2:
.80
Question 2
3 / 3 pts
What is the value of Investment: I = _320_______

Question 3
3 / 3 pts
Fill in the intercept and slope values to correctly complete the AE equation: AE = +
Y
Answer 1:
1070
Answer 2:
.80
Question 4
3 / 3 pts
The value of equilibrium output (Y) = 5350
Incorrect
Question 5
0 / 3 pts
The value of equilibrium consumption (C) =
__Got wrong____
Question 6
3 / 3 pts
We now incur shocks to the economy as provided above in the
red font
. Use these new
conditions to get expressions for the Consumption function, Investment and the AE equation.
Fill in the intercept and slope values to correctly complete the
new
consumption function: C =
+
Y
Answer 1:
870
Answer 2:
.80
Question 7
3 / 3 pts
What is the
new
value of Investment: I = 440
Question 8
3 / 3 pts
Fill in the intercept and slope values to correctly complete the
new
AE equation: AE =
+
Y
Answer 1:
1110
Answer 2:
.80
Question 9
3 / 3 pts
The
new
value of equilibrium output (Y) = 5550
Incorrect
Question 10

0 / 3 pts
The
new
value of equilibrium consumption (C) = Got
wrong
NOTE:
There is no graphing component to be collected for this homework. However, you should be
comfortable creating two separate graphs from the above questions in part 1. You should be able to:
1.
Graph the consumption function both before and after the shock on one graph, and also plot
equilibrium consumption and output values both before and after the shock.
2.
Graph the AE equation both before and after the shock on one graph, and also plot
equilibrium output Y both before and after the shock.
Question 11
3 / 3 pts
NOTE:
There is no graphing component to be collected for this homework. However, you should be
comfortable creating two separate graphs from the above questions.
You should be able to:
1.
Graph the consumption function both before and after the shock on one graph, and also plot
equilibrium consumption and output values both before and after the shock.

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- Fall '10
- staff
- Macroeconomics, Inflation, Supply And Demand, ECON 104, Macroeconomics, Homework04