Let a macroeconomic model be of the following form:

C = a + bY_D                            a = 10

T = T₀                                   b = 4/5

G = G₀                                  G₀ = 10

 I = I₀                                   I₀ = 10

 Y_D = Y - T₀                                     T₀ = 10                                      

(a) Calculate the equilibrium levels of national income (Y), consumption (C) and Savings (S).

(b) Graph the above model representing both equilibrium conditions by separate graphs. That is,Y = C + I + G, and Total withdrawals = Total injections by graphing C and C + I functions separately as well as the aggregate expenditure function, C + I + G on the same graph paper.  Similarly, graph the S function by itself and S + T₀ on a separate graph paper.  Label all the slopes and intercepts.  Make sure to present schedules.

(c)  If "a" in the consumption function were to increase by 5, G were to increase by 10 T₀ were to increase by 10, calculate the separate as well as the total net effect of these changes on Y.