1. Comparative Statics: Given the following system of equations:

z = x + y + w

x = az + br

y = z + x + w

where r and w are exogenous, non-negative variables; a, b, , , > 1; and (a++a) > 1.

(a) Find the reduced form equations

(b) What effect would a change in w have on x?

(c) What effect would a change in r have on z?