The following information is given:

S=120+0.4Y M=150+0.20Y I=100 X=350

a) Draw a graph and show the intercept terms on the graph. Calculate equilibrium income level Calculate trade balance when the economy is at the equilibrium and show trade balance on the graph. Is there a deficit or surplus?

b) If autonomous imports increase by 100 units, what happens to trade balance? Show new trade balance on the graph you drew in part (a). Will there be a deficit or surplus?