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Question
Calculate Autonomous Consumption Expenditure from the following data about an economy which is in equilibrium:
National income = 500
Marginal propensity to save = 0.30
Investment expenditure = 100
Solution
Given that
I = 100
Y = 500
MPS = 0.30
MPC = 1 - MPC = 1 - 0.30 = 0.70
As we know
Y = C + I
`500 = barC + cY + I`
`500 = barC + 0.7 xx 500 + 100`
C = 500
Therfore `barC = 50`
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