Question

Assume that autonomous consumption is ​$1 comma 769 billion and disposable income is ​$10 comma 100 billion. Using the consumption​ function, calculate consumption expenditure if an increase of​ $1,000 in disposable income leads to an increase of ​$610 in consumption expenditure. Consumption expenditure is ​$ nothing billion. ​(Enter your response as a whole​ numbe

Answer 1

Consumption expenditure is $7,930 billion

Step-by-step explanation:

Consumption function: C = A + MD

where,

C is the consumer spending,

A is the autonomous consumption

M is the marginal propensity to consume

D is the disposable income

MPC = Increase in consumption ÷ Increase in income

= $610 ÷ $1000

= 0.61

Therefore,

C = 1,769 + 0.61 (10,100)

= 1,769 + 6,161

= $7,930

Therefore, the Consumption expenditure is $7,930 billion.