4. Consider the following national income model where investment is not autonomous but is a function of income. Y = A E A E = C + II C = C 0 + bY I = I 0 + aY where C 0 = 65 , I 0 = 70 , b = 0.6 and a = 0.2 . a. Find the reduced form equation for Y . b. Solve for the numerical value of Y . c. What is the interpretation of the parameter a? .

1. 4. Consider the following national income model where investment is not autonomous but is a
function of income. Y = A E A E = C + II C = C 0 + bY I = I 0 + aY where C 0 = 65 , I 0 = 70 , b
= 0.6 and a = 0.2 . a. Find the reduced form equation for Y . b. Solve for the numerical value of
Y . c. What is the interpretation of the parameter a?