We consider a "Closed Economy National - Income Model",
whose variables are:
Y - (National) Income (or Output)
C - Consumption
I - Investment
G - Government Expenditure
T - Taxes
These variables are related by the following equations:
Y = C + I + G
C = a + b * (Y -T)
T = c + d * Y
Where a > 0, 0 < b < 1, c > 0 and 0 < d < 1 are just some constants
depending on the particular economy chosen.
Question 1. Find the income Y as a function of variables I and G only (it may depend on a, b, c, d as well, since they are just constants, not variables).
Question 2. How does an increase in investment inuence the income ?
How does an increase in government expenditure inuence the income?
Justify your answers using partial derivatives.