Take the following model for an economy as a starting point: (1)Y= C + I + G

(2) C = z^C + c (Y - T )

(3) I = z ^I + b Y

(4) T = z^T + tY

Assume that the following is given:

z^c = 200, z^I = 200, z^T =150, b = 0.20, c = 0.75, t = 0.30, G = 400

a) Explain the equations included in the model

b) What are the equilibrium values for Y and C?

c) What will be the effect on GDP and private savings of an exogenous increase in private investments,z^I =10? ? Show the effect mathematically and explain the economic mechanisms.