Suppose there is an increase in autonomous consumption.Specifically,suppose c0 increases where C = c0 + c1YD.This increase in autonomous consumption will cause which of the following to increase?

Question

Quizplus · Accepted Answer

An increase in autonomous consumption (c0) means that for any given level of disposable income (YD), consumption (C) will be higher. This will increase both equilibrium income and equilibrium disposable income since the spending multiplier will increase. Furthermore, an increase in consumption will also increase demand for goods and services, indicating that choice C is also correct. Therefore, the correct answer is D, all of the above.

Suppose There Is an Increase in Autonomous Consumption