1. We use the following terminology in this part: aggregate income Y and disposable income Yd (= Y T), consumption function C(Yd), planned investment function I(r), government spending G, and taxation T = tY where t is the marginal tax rate; r% denotes the real interest rate in the economy. (Note, r is in percentage points, e.g. r = 2 means the interest rate is 2%. When doing calculations, the interest rate should not simply be inserted in decimal form. For example, if r = 2 then I(2) = 124 2 = 122.)
2. Consider a hypothetical economy where:

• C(Yd)=12+0.75(Y T)
• I(r)=1241r
• G = 120
• t = 20%

1. Using the information above, write out the planned Aggregate Expenditure equa- tion. (Hint: Remember that this takes the form of AE = . . . .)

how do you find AE?