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As identified in their 2014 election manifesto, the ruling party in Macademia, pledged to increase the pace of progress in Power and Energy. Suppose following this decision, the government of the country, announces their plan for increasing the availability of solar energy through the installation of 30 lakh units of solar panels.

a) Which component of Aggregate expenditure will be primarily affected if the above was implemented? (C, I, G, X or IM). Is this expenditure autonomous or induced? Why?

b) Imagine the economy was running a balanced budget (i.e. T-G = 0), how will the government's plan discussed above impact their budget balance?

c) As a result of the change in part (b), what impact can be expected in Macademia's loanable funds market? Use an appropriate graph to show your answer.

d)What do you expect will happen to the equilibrium interest rate, saving and investment in the economy?