Question

you are given the followint information about the close economy with no government:
consumption =115 + 0.6
investment =550
calculate the value of autonomous spending?

Answer 1

$ANSWER$

Autonomous spending $= \$665$

$SOLUTION$

Autonomous spending is the level of aggregate expenditure not affected by national income. In a two sector economy, the level of autonomous spending is the sum of autonomous spending and investment. Investment is autonomous or exogenous in the sense that it is not affected by national income.

Autonomous spending = autonomous consumption + investment spending

We are given:

$C = 115 + 0.6Yd$

$I = 550$

Autonomous spending $= \$115 + \$550$

$=\$665$