Q26 of 38 Page 1

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

Y = C + MPC(Y) + I

Where,


Y = Income = 5000


MPC = Marginal propensity to Consume = 1 – MPS = 0.8


I = Investment Expenditure


C = Autonomous consumption



More from this chapter

All 38 →
24

Explain the role of reverse repo rate in controlling money supply.

 25

Explain how government budget can be used to influence distribution of income?

 27

Why does the demand for foreign currency fall and supply rises when its price rises? Explain.

 28

Explain ‘non-monetary exchanges’ as a limitation of using gross domestic product as an index of welfare of a country.