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Fact 27.5.1
The economy of Beverly Hills has a consumption function of C = 10 + 0.8Y, investment equal to 6, government expenditure equal to 10, exports equal to 10, and an import function of M = 0.1Y.
-Refer to Fact 27.5.1. If autonomous consumption increases by 10, what is the new equation of the aggregate expenditure function for this economy?
A)AE = 26 + 0.7Y
B)AE = 36 + 0.7Y
C)AE = 46 + 0.7Y
D)AE = 46 + 0.8Y
E)AE = 46 + 0.9Y

Question

Quizplus · Accepted Answer

The new autonomous consumption is 20 (10 + 10). The aggregate expenditure function is AE = C + I + G + X - M = (20 + 0.8Y) + 6 + 10 + 10 - 0.1Y = 46 + 0.7Y.

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