Advertisements
Advertisements
Question
If in an economy, the Investment Multiplier is 4 and Autonomous Consumption is ₹ 30 crore, the relevant consumption function would be ______.
Options
C = 30 + 0.75Y
C = (-) 30 + 0.25Y
C = 30 + 0.25Y
C = (-) 30 + 0.25Y
Advertisements
Solution
If in an economy, the Investment Multiplier is 4 and Autonomous Consumption is ₹ 30 crore, the relevant consumption function would be C = 30 + 0.75Y.
Explanation:
Investment Multiplier `(k)` = 4
Autonomous Consumption `(bar"C")` = ₹ 30 crore
K =`1/(1-"MPC")`
4 = `1/(1-"MPC")`
MPC = `1/4`
MPC = 0.25
MPC = 1 - 0.25
MPC = 0.75
Consumption Function:
C = `bar"C" + "MPC (Y)"`
C = 30 + 0.75 Y
APPEARS IN
RELATED QUESTIONS
What is marginal propensity to consume?
Given the following data, find the missing value of 'Government Final Consumption Expenditure' and 'Mixed Income of Self Employed'.
| S.No. | Particulars | Amount (In ₹ crores) |
| (i) | National Income | 71,000 |
| (ii) | Gross Domestic Capital Formation | 10,000 |
| (iii) | Government Final Consumption Expenditure | ? |
| (iv) | Mixed Income of Self Employed | ? |
| (v) | Net Factor Income from Abroad | 1,000 |
| (vi) | Net Indirect Taxes | 2,000 |
| (vii) | Profits | 1,200 |
| (viii) | Wages & Salaries | 15,000 |
| (ix) | Net Exports | 5,000 |
| (x) | Private Final Consumption Expenditure | 40,000 |
| (xi) | Consumption of Fixed Capital | 3,000 |
| (xii) | Operating Surplus | 30,000 |
Final goods refer to those goods which are used either for ______ or for ______.
Consumption depends on ______
Aggregate Demand is not determined by which of the following.
Statement 1: Consumption function assumes that, consumption changes at a constant rate as income changes.
Statement 2: Autonomous consumption is the ratio of total consumption (C) to total income (Y).
In light of the given statements, choose the correct alternative from the following:
Which formula represents the consumption function?
At zero income, what happens to consumption?
What is autonomous consumption?
What is induced consumption?
Which expression represents induced consumption in the consumption function?
Which formula correctly defines Marginal Propensity to Consume (MPC)?
Which equation is equivalent to \[MPC+MPS=1\]?
What does the 45° line represent?
What does it mean when the consumption curve is below the 45° line?
For the consumption function \[C=100+0.8Y\], what is autonomous consumption?
