Question

An economy is in equilibrium. Find 'autonomous consumption' from the following:
National income = 1000
Marginal propensity to consume = 0.8
Investment expenditure = 100

Answer 1

NationalIncomeY 1,000
Marginalpropensity to consume(MPC) 0.2
Investment expenditure(I) 100
We know that

Y = C + I

`1,000 = barC + MPC(Y) + I`

`1,000 = barC + 0.8 xx 1,000 + 100`

`1,000  - barC + 900`

`1,000 - 900 = barC`

Therefore `barC = 100`