a. What is the net effect of this expansionary monetary policy (i.e.. negative reall rates of interest) on consumption, all else constant? To answer this question, assume we have an equal amount of "Dagwoods" and "Homers" so we can simply add the change in Dagwood's consumption to the change in Homer's consumption. Please give the actual change in consumption, given this expansionary policy. Change in Dagwood's consumption: Change in Homer's consumption: Net change in consumption: b. Now consider the case where Homer is credit constrained and thus, cannot qualify for cheap loans since his balance sheet is a wreck. As such, the real rate of interest that Homer faces is 10% (r = 0.10), and not the ultra-low negative real rate -.05 that Dagwood (who has a solid balance sheet) faces. Please re-answer part a) above, assuming that Homer faces a real rate of 0.10 and Dagwood faces a real rate of (-.05). Use the actual numbers, that is, add the change in Dagwood's consumption (you already did this in 3a) to the change in Homer's consumption, given that he faces a real rate of 0.10, all else constant (i.e., after his y rose). Change in Dagwood's consumption: Change in Homer's consumption: Net change in consumption: