There were two unanswered questions in the problems we covered in class (one in slide#20 of the lecture – this was not a typo – and the other in slide#21). I will rewrite them here. The first person to answer both correctly, gets a half-point bonus. Please write all steps clearly.
1. If C0 = $500, Cy = 0.8 and t = 0.2, what is the value of income Y, for which household saving SH equals zero?
2. If C0 = $400, Cy = 0.75 and t = 0.15 and national income changes from $10,000 million to $11,000 million, what is the change in YD and C? Calculate these changes without using the consumption function.
You must answer both questions correctly, and show clearly how you got the answer. The first person to do that will get the half-point bonus.