Exhibit 10-7

-Here is a consumption function: C = C₀ + MPC(Y_d) .If consumption is $2,000,MPC =0.75,and disposable income is $2,000,what does autonomous consumption equal?

Question

Exhibit 10-7 -Here is a consumption function: C = C₀ + MPC(Y_d).If consumption is $2,000,MPC =0.75,and disposable income is $2,000,what does autonomous consumption equal?

Quizplus · Accepted Answer

Autonomous consumption (C₀) can be found by plugging in the given values into the consumption function: C = C₀ + MPC(Y_d) $2,000 = C₀ + 0.75($2,000) $2,000 = C₀ + $1,500 Solving for C₀: C₀ = $2,000 - $1,500 C₀ = $500

Exhibit 10-7 -Here Is a Consumption Function: C = C0 + MPC(Yd).If

Exhibit 10-7 -Here Is a Consumption Function: C = C₀ + MPC(Y_d).If