Suppose you are given the following information for an economy without government spending, exports or imports. C is desired consumption, I is desired investment, and Y is national income. C and I are given by;

C = 1400 + 0.8Y

I = 400

a.What is the equation for the aggregate expenditure (AE) function? Indicate the autonomous spending and the induced spending part of the aggregate demand function.(3 marks)

b.Applying the equilibrium condition that Y = AE, determine the level of equilibrium national income.(3 marks)

c.Using your answer from part (b), determine the values of consumption, saving, and investment when the economy is in equilibrium.(4 marks)