A two sector model economy is specified as;
Y = C + I
C = a + by d
yd = Y-T
T = to
I = 1,
Where Y-Income, C-Consumption, I-Investment, a-autonomous consumption, b-MPC, Yd-disposable income, T-tax, to-autonomous tax, Io-autonomus investment;
i. Define endogenous and exogenous variables and list them from the economy's specification.(4 marks)
ii. Compute equilibrium income (7) and consumption (C).(8 marks)
iii. Compute the investment multiplier.(3 marks)