Exercise 1. Suppose that the economy of a country is given by the following behavioral function:

C = Co + 0.8Yd

And, in addition, you have the following information:

Direct taxes (t) = 0.2

Co = 100

a) define the savings function. Graph.

b) Determine income and consumption when savings are equal to 0.

c) Graph the saving function and the consumption function and show the point where the savings are equal to zero.