Question

An economy is in equilibrium. Calculate Autonomous Consumption from the following :
National Income = 1,250
Marginal Propensity to Save = 0.2
Investment Expenditure = 150

Answer 1

Given that
Marginal propensity to save S = 0.2
Marginal propensity to consume c 1 - MPS = 1 - 0.2 = 0.8
Investment expenditure(I) = 150
NationalIncome(Y) = 1250
As we know that

Y= C + I

`Y = bar(C) + MPC(Y) + I`

`1250 = bar(C) + 0.8 xx 1250 + 150`

`1250 = bar(C) + 1000 + 150`

Autonomous Consumption = `(barC)` = 100