Answer to Question #137478 in Macroeconomics for Amanda Cilo

Question

If consumption = 115 +0.6y
And investment =550

What is the value of autonomous spending AND the multiplier

Answer 1

Solution:

Autonomous spending is that part of spending which is independent of the income level.

Therefore;

Autonomous Spending = $( 115 + 550)

= $665

The multiplier m = 1/(1-MPC)

= 1/0.4

= 2.5