Use two green points (triangle symbol) to connect the two black points (plus symbols) representing the consumption schedule after the change in taxes. Use two purple points (diamond symbol) to connect the two black points (plus symbols) representing the consumption schedule that would result from a tax increase through a variable tax. (Hint: As before, the consumption schedule must pass through one point on the left and one point on the right.) Hint: The new consumption schedule must pass through one point on the left and one point on the right. 50 REAL CONSUMER SPENDING (Billions of dollars) 10 8 + Consumption with Tax Increase through a Fixed Tax + Consumption with Tax Increase through a Variable Tax + + + + 20 40 60 REAL GDP (Billions of dollars) 80 100 (?) Use the new consumption line you just plotted to calculate the new total expenditure at two levels of real GDP and fill in the following table. GDP level (Billions of dollars) 10 90 Total Expenditure (Billions of dollars)

Given the following information for an insurance company that writes 24-month term policies: Number of Vehicles 50 100 Policy Group A B Effective Date January 1, 2010 Expiration Date December 31, 2011 July 1, 2010 June 30, 2012 All policies within each group have the same effective date. (a) Calculate the earned car-years for calendar year 2011. (b) Calculate the earned car-years for policy year 2010 evaluated as of December 31, 2010 and as of December 31, 2011. (c) Assume Policy Group B cancels on January 1, 2011. Calculate the 2010 policy year written car- years evaluated as of December 31, 2010 and as of December 31, 2011 for Policy Group B. (d) Assume Policy Group B cancels on July 1, 2011. Calculate the 2010 and 2011 calendar year written car-years for Policy Group B.