question_answer

Calculate Autonomous Consumption Expenditure from the following data about an economy which is in equilibrium:

National income                                  = 590

Marginal Propensity to save                 = 0.30

Investment expenditure                       = 100

Answer:

Given:

National income, Y = 500

MPS = 0.30

Investment expenditure, I = 100

Marginal propensity to consume, \[MPC=1MPS=10.30=0.70\]

We know that, \[Y=C+I\]            ..... [AD = AS and AD = CI]

\[\Rightarrow \]   \[\text{Y=}\overline{\text{C}}\text{+b(Y)+I}\]               ... [\[\because \]\[C=\overline{C}+I\]]

\[\Rightarrow \]               \[500=\overline{C}+0.70(500)+100\]

\[\overline{C}=500350100\]

\[\overline{C}\]= 50