In an economy the autonomous investment is 60 and the marginal propensity to consume is 0.8. If the equilibrium level of Income is 400, then the autonomous consumption is 30. True or False? Justify your answer.
(False. The given value of autonomous consumption is Incorrect. The correct value is 20)

Open in App

Solution

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

=> 400 = c + 0.8 (400) + 60

=> 400 = c+ 320 + 60

=> 400 = c+ 380

=> c = 400 - 380 = 20.
Hence, autonomous consumption at equilibrium will be 20.

Suggest Corrections

Similar questions

Q. An economy is in equilibrium. Find autonomous consumption expenditure:
National Income = 1,600
Investment Expenditure = 300
Marginal Propensity to Consume =0.8
(Autonomous Consumption Expenditure = 20)

Q. An economy is in equilibrium. Calculate Marginal Propensity to Consume:
National Income = 1,000
Autonomous Consumption Expenditure = 200
Investment Expenditure = 100
(Marginal Propensity to Consume = 0.70)

Marginal propensity to consume is two times more than marginal propensity to save. Autonomous consumption is Rs. 80 crores. Derive the saving function.

If MPC is 0.75 and income level at the consumption level of Rs. 1,000 is Rs. 1,200, then autonomous consumption would be Rs. 200. State true or false.

Q. 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)

Q. If in an economy, Saving Function is given by S = (-) 50 + 0.2 Y and Y = Rs. 2,000 crores; consumption expenditure for the economy would be Rs. -1,650 crores and the autonomous investment is Rs. 50 crores and the marginal propensity to consume is 0.8. True or False? Justify your answer with proper calculations.

Join BYJU'S Learning Program

In an economy the autonomous investment is 60 and the marginal propensity to consume is 0.8. If the equilibrium level of Income is 400, then the autonomous consumption is 30. True or False? Justify your answer. (False. The given value of autonomous consumption is Incorrect. The correct value is 20)

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 => 400 = c + 0.8 (400) + 60 => 400 = c+ 320 + 60 => 400 = c+ 380 => c = 400 - 380 = 20.Hence, autonomous consumption at equilibrium will be 20.

In an economy the autonomous investment is 60 and the marginal propensity to consume is 0.8. If the equilibrium level of Income is 400, then the autonomous consumption is 30. True or False? Justify your answer.
(False. The given value of autonomous consumption is Incorrect. The correct value is 20)