You are given the following data concerning Kadwan, a country located in the mountains.

(1) Consumption function: C = 150 + 0.7Y 

(2) Investment function: I = 75 

(3) AE ≡ C + I (4) AE = Y

a. What is the marginal propensity to consume in Kadwan, and what is the marginal propensity to save?

b. Graph equations (1) to (4) and solve for equilibrium income.

c. Suppose equation (2) is changed to (2’) I = 90. What is the new equilibrium level of income? By how much does the 15-currency unit increase in planned investment change equilibrium income? What is the value of the multiplier?

d. Calculate the saving function for Kadwan. Plot this saving function on a graph with equation (2). Explain why the equilibrium income in this graph must be the same as in part b.