Suppose we have a closed two-sector economy, where the consumption function is C = 0.7Yd, where Yd is disposable income, and investment, I, is equal to 60.

a) Calculate output in equilibrium.

b) Calculate the level of savings.

c) Suppose that households decide to raise their savings by 10. Calculate the new output in equilibrium.

d) Calculate the new level of savings.

e) Using the situation from above, explain the paradox of thrift. Does that mean that the less societies save, the better for them?