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An Economy is in Equilibrium. Find 'Autonomous Consumption' from the Following: National Income = 1000 Marginal Propensity to Consume = 0.8 Investment Expenditure = 100 - CBSE (Arts) Class 12 - Economics

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Question

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

Solution

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`

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Solution An Economy is in Equilibrium. Find 'Autonomous Consumption' from the Following: National Income = 1000 Marginal Propensity to Consume = 0.8 Investment Expenditure = 100 Concept: Consumption Function and Propensity to Save.
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