Question

An economy is in equilibrium. From the following data about an economy calculate autonomous consumption:
(i) Income=5000
(ii) Marginal Propensity to save=0.2
(iii) Investment expenditure=800

Answer 1

Y=C+I
`Y=bar(C)+bY+I`
`Y=bar(C)+bY+I`
`5000=bar(C)100+0.8(5000)+800[MPS=0.2, MPC=0.8]`
5000=bar(C )+4000+800
bar(C )=5000-4800=200