An economy is in equilibrium. From the following data about an economy calculate autonomous consumption. |
(a) Income = 5000 |
(b) Marginal propensity to save = 0.2 |
(c) Investment expenditure = 800 |
Answer:
Given that, Income (y) = 5000 Marginal Propensity to save (s) = 0.2 Therefore, marginal propensity to consume \[=1MPS\] \[=10.2=0.8\] \[\therefore \] \[Y=C+by+I\] \[\Rightarrow \] \[5000=C+0.8\times 5000+800\] \[\Rightarrow \] \[5000=C+4000+800\] \[\Rightarrow \] \[5000=C+4800\] \[\Rightarrow \]\[50004800=C\] \[\Rightarrow \] 200 = C \[\therefore \] Autonomous Consumption = 200
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