Consider a simple aggregate expenditure model where all components of aggregate expenditure are autonomous except consumption. If the consumption function is JC = $500 + 0.8Y, planned investment = $200, government purchases = $300,
Jnet exports = $100, and real GDP = $1,000, what is the amount of autonomous expenditures?
A) $500
B) $1,000
C) $1,100
D) $1,900

Question

Quizplus · Accepted Answer

Autonomous expenditures are those that do not depend on the level of real GDP. In this case, the only autonomous component of aggregate expenditure is consumption which has an intercept of $500. Therefore, autonomous expenditures = $500 (from consumption) + $200 (investment) + $300 (government purchases) + $100 (net exports) = $1,100.

Consider a Simple Aggregate Expenditure Model Where All Components of Aggregate