Suppose the initial conditions of the economy are characterized by the following equations. In this problem, we assume that prices are fixed at 1…
- Suppose the initial conditions of the economy are characterized by the following equations. In this problem, we assume that prices are fixed at 1 (the price index is 100 and when we deflate, we use 1.00) so that nominal wealth equals real wealth.
1) C = a0 + a1 (Y-T) + a2 (WSM) + a3 (WRE) + a4 (CC) + a5 (r)
1′) C = a0 + a1 (Y-200) + a2 (10,000) + a3 (15,000) + a4 (100) + a5 (3)
2) I = b0 + b1AS + b2CF + b3 (r)
2′) I = b0 + b1 (160) + b2 (1800) + b3 (3)
3) G = G
3′) G = 400
4) X-M = X-M
4′) X-M = -200
Where: a0 = 200, a1 = .80, a2 = .05, a3 = .10, a4 = .8, a5 = -500, b0 = 300, b1 = .5, b2 = .5, b3 = -200
Derive an expression for the consumption function and graph it on your exam sheet. Show all work.
2.Interpret a2 and a3 (i.e., what do they measure) and why are they so important in terms of measuring the impact of the Great Recession on consumption.
ORDER YOUR ORIGINAL PAPER
Request for a custom paper or place a new order
THE BEST CUSTOM ESSAY WRITING SERVICE AT YOUR FINGERTIPS
Forget All Your Assignment & Essay Related Worries By Simply Filling Order Form
