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

Quizplus · Accepted Answer

We can use the given information to set up an equation and solve for the autonomous consumption: C = C₀ + MPC(Y_d) $2,000 = C₀ + 0.75($2,000) $2,000 = C₀ + $1,500 $500 = C₀ So the autonomous consumption equals $500, which is answer choice C.

Here Is a Consumption Function: C = C0 + MPC(Yd)

Here Is a Consumption Function: C = C₀ + MPC(Y_d)