Consider this economy:C = 100 + 0.5YI = 400 + 0.1YThe marginal propensity to consumer is b - Numeric Answer.The multiplier is c - Numeric Answer.Autonomous spending is d - Numeric Answer.Autonomous consumption is
Question
Consider this economy:C = 100 + 0.5YI = 400 + 0.1YThe marginal propensity to consumer is b - Numeric Answer.The multiplier is c - Numeric Answer.Autonomous spending is d - Numeric Answer.Autonomous consumption is
Solution
The given economy has a consumption function C = 100 + 0.5Y and an investment function I = 400 + 0.1Y.
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The marginal propensity to consume (b) is the coefficient of Y in the consumption function. In this case, b = 0.5.
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The multiplier (c) is calculated as 1/(1 - b). So, c = 1/(1 - 0.5) = 2.
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Autonomous spending (d) is the sum of the constant terms in the consumption and investment functions. So, d = 100 + 400 = 500.
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Autonomous consumption is the constant term in the consumption function, which is 100.
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