Suppose X=IM=0, C=10+0.6Yd, I=40, G=20 and T=50.

1. Find the total saving function St. The right side is related to Y.

2. Draw the St=I diagram. The intercept values should be clearly indicated in the diagram. The equilibrium output should also be indicated but you don't need to calculate the value.

3. If the MPC decreases to 0.5, how will this affect the St=I diagram? What will happen to equilibrium output and total saving? Briefly explain why total saving is changed or not changed. Identify the forces that lead to change or stability in total saving.