Macro

Income & Employment

Medium

Calculate autonomous consumption expenditure from the following data about an economy which is in equilibrium.

National Income = Rs. 1000

Marginal propensity to save = 0.2

Investment expenditure = Rs. 150

Rs. 200

Rs. 150

Rs. 950

Rs. 50

✅ Correct Option: 4

At equilibrium Y = C + I, so C = Y - I = 1000 - 150 = 850.

MPC = 1 - MPS = 1 - 0.2 = 0.8.

Consumption function: $C = \bar{c} + bY$

$850 = \bar{c} + 0.8(1000)$

$850 = \bar{c} + 800$

$\bar{c} = 50$ . Hence autonomous consumption is Rs. 50.

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Calculate autonomous consumption expenditure from the following data about an economy which is in equilibrium. National Income = Rs. 1000 Marginal propensity to save = 0.2 Investment expenditure = Rs. 150

Solution

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CUET Economics Past Year Questions (Topic-Wise)

Calculate autonomous consumption expenditure from the following data about an economy which is in equilibrium.

National Income = Rs. 1000

Marginal propensity to save = 0.2

Investment expenditure = Rs. 150