In one country are known the following facts (in billion USD):

Y=C+I+G

C=C(Y-T)=125+0,75(Y-T)

I=I=100

G=G = 150

T= T = 100

The government decides to purchase airplanes at a total cost of 1 billion.

The government decides to lower net taxes by 1 billion USD. (YD = Y-T) This tax decrease will increase the level of disposable income at every level of Y by 1 billion USD. Consequently, consumption will increase by MPC x 1 billion at each level of Y.

A)Write equation for consumption, knowing that c= 0,75.

B)How will the consumption change due to a decrease in tax in the product-expenditure model (Keynesian cross)? Describe the graph of the initial consumption curve (C1) and the new one (C3)

C)How will the curve of planned expenditures shift from PE2 to PE3 under the consideration of no changes in variables of I and G?

D)What will be the new equilibrium level of income Y3 for PE3?