Question: 10.1 A simple macroeconomic model consists of a consumption function and an income identity: C = 1 + 2Y + u Y = C +

10.1 A simple macroeconomic model consists of a consumption function and an income identity:

C = β1 + β2Y + u Y = C + I, where C is aggregate consumption, I is aggregate investment, Y is aggregate income, and u is a disturbance term. On the assumption that I is exogenous, derive the reduced form equations for C and Y.

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