Question

Calculate autonomous consumption expenditure from the following data about an economy which is in equilibrium
National income = 1200
MPS = 0.20
INVESTMENT EXPENDITURE= 100

Answer 1

National Income (Y) = 1200
MPS = 0.20
MPC (c) = 1 – MPS = 1 – 0.20 = 0.8
I = 100

We know,
Equilibrium is struck when Y = C + I
$$\begin{gathered} Y=\overline{C}+cY+I \\ 1200=\overline{C}+0.8\times 1200+100 \\ \overline{C}=1200-1060 \\ \therefore \boxed{\overline{C}=140} \end{gathered}$$