Question

in an economy following data are given on the basis of calculate consumption expenditure if APC - 1 , AUTONOMOUS CONSUMPTION - 100 , MPC - 5​

Answer 1

Answer:

For example :-

An economy is in equilibrium. From the following data about an economy, calculate autonomous consumption.

Income = 5,000

Marginal Propensity to Save = 0.2

Investment Expenditure = 800

(Autonomous Consumption = 200)

Explanation:

If MPS=0.2, then

MPC= 1-MPS= 1-0.2= 0.8

Consumption Function is C = c + 0.8 Y where Y in the income in the economy and c= Autonomous consumption.

At equilibrium level of output,

AS=AD

Y= C+I

=> 5,000 = c + 0.8 (5,000) + 800

=> 5,000 = c+ 4,000 + 800

=> 5,000 = c+ 4,800

=> c = 5,000- 4,800 = 200.

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