suppose the initial conditions of the economy are characterized by the

Question

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 100and when we deflate, we use 1.00) so that nominal wealth equals real wealth. \text { 1) } C=a_{0}+a_{1}(Y-T)+a_{2}(W S M)+a_{3}(W R E)+a_{4}(C C)+a_{5}(r) \left.1^{\prime}\right) C=a_{0}+a_{1}(Y-500)+a_{2}(10,000)+a_{3}(15,000)+a_{4}(100)+a_{5}(2) \text { 2) } \mid=b_{n}+b_{1} A s+b_{2} c F+b_{2}(r) \left.2^{\prime}\right) I=b_{0}+b_{1}(200)+b_{2}(2400)+b_{3}(2) 3) G = G 3') G = 700 4) X-M = X-M 4') X-M = -30o \text { Where: } a_{0}=100, a_{1}=.90, a_{2}=.04, a_{3}=.08, a_{4}=.8, a_{5}=-100, b_{0}=500, b_{1}=5, b_{2}=5 Derive an expression for the consumption function and graph it on your exam sheet.Show all work.