2. Consider the simplified national income model:

AD = C + I............(1)

Where AD is aggregate demand, C is consumption, and I is investment. Consumption is determined by a behavioral equation, which in this problem takes the form

C= 3,300+ .8Y........(2)

Y is national income.

Y and C are ENDOGENOUS VARIABLE and Investment is exogenous VARIABLE. initially we assume

I =1,500...................(3)

The equilibrium condition requires that aggregate demand equals national income, that is,

AD = Y..................(4)

By using the matrix (Linear) algebra, not by using repeated substitution method, do

i)Determine the equilibrium level of national income (Y) and consumption (C.)

ii)Show the overall change or the comparative statics of I increased by 500 on Y and C.