Question

If C = 40 + 0.25y, then autonomous consumption is
(a) 80 (b) 40
(C) -40 (d) None of these​

Answer 1

(d) None of these​

• The consumption function, often known as the Keynesian consumption function, is a mathematical expression expressing the functional connection between total consumption and gross domestic product. John Maynard Keynes, a British economist, introduced it and said it could be used to monitor and foresee total aggregate consumption spending.
• According to the traditional consumption function, changes in income and consumer spending are entirely correlated. If this were the case, aggregate savings ought to rise proportionately as the GDP does over time. The goal is to establish a mathematical link between consumer spending and disposable income, but only at the aggregate level.
• One of the pillars of Keynesian macroeconomic theory is the stability of the consumption function, which is based in part on Keynes' Psychological Law of Consumption and is particularly striking when compared to the volatility of investment. The majority of post-Keynesians acknowledge that because spending patterns vary as income increases, the consumption function is not long-term stable.

Here, according to the given information, we are given that,

C =  40 + 0.25y

Let C = 500/-

Then, y = $\frac{500-40}{0.25}$ = 240.

Hence, option d that is None of these is the answer.

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