Let consumption equal C = 100 + 0. The equilibrium condition is that income (Y) equals planned expenditures, or Y = C + I, where I is investment.

2. Let consumption equal C = 100 + 0.75Y. The equilibrium condition is that income (Y) equals planned expenditures, or Y = C + I, where I is investment.

a. Solve for equilibrium levels of income and consumption if I = 500.

b. Find reduced-form equations for Y* and C* in terms of the exogenous variable, I.

c. Describe the comparative statics results of this system with respect to changes in I.