Question

In Econland autonomous consumption equals 700, the marginal propensity to consume equals 0.80, net taxes are fixed at 50, planned investment is fixed at 100, government purchases are fixed at 100, and net exports are fixed at 40. Autonomous expenditure equals:

Answer 1

990. This is obtained by summing up autonomous consumption, fixed net taxes, fixed planned investment, fixed government purchases and fixed net taxes. Marginal propensity to consume is left out since it is dependent on income.