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:
.

Question 2
3 / 3 pts

Question 3
3 / 3 pts
Fill in the intercept and slope values to correctly complete the AE equation:

Question 4

3 / 3 pts

Question 5
3 / 3 pts
The value of equilibrium consumption (C) = ___5030___
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 = 870 + .80 Y
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 = 1110 + .80 Y
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) = _______
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.