The diagram below shows desired aggregate expenditure for a hypothetical economy.Assume the following features of this economy:
∙ marginal propensity to consume (mpc)= 0.80
∙ net tax rate (t)= 0.15
∙ no foreign trade
∙ fixed price level
∙ all expenditure and income figures are in billions of dollars. FIGURE 22-3
-Refer to Figure 22-3.What is the level of autonomous consumption?
A)$0
B)$325
C)$350
D)$650
E)$1000

Question

The diagram below shows desired aggregate expenditure for a hypothetical economy.Assume the following features of this economy:
∙ marginal propensity to consume (mpc)= 0.80
∙ net tax rate (t)= 0.15
∙ no foreign trade
∙ fixed price level
∙ all expenditure and income figures are in billions of dollars.  FIGURE 22-3
-Refer to Figure 22-3.What is the level of autonomous consumption?
A)$0 
B)$325 
C)$350 
D)$650 
E)$1000

Quizplus · Accepted Answer

Autonomous consumption is the level of consumption when income is zero. In Figure 22-3, this is represented by the point where the consumption function intersects the vertical axis, which is $350.

The Diagram Below Shows Desired Aggregate Expenditure for a Hypothetical