Thank you for visiting In an economy with no exports and imports autonomous consumption is 4 trillion the marginal propensity to consume is 0 8 investment is 3 trillion. This page is designed to guide you through key points and clear explanations related to the topic at hand. We aim to make your learning experience smooth, insightful, and informative. Dive in and discover the answers you're looking for!
Answer :
Final answer:
The consumption function and equilibrium GDP are calculated based on autonomous consumption, MPC, and investment in the economy. So, the correct option is a. $20 trillion.
Explanation:
The consumption function:
- C = Autonomous Consumption + (MPC * Disposable Income)
Equilibrium:
- Equilibrium GDP = Autonomous Spending / (1 - MPC)
In this scenario, with autonomous consumption at $4 trillion, MPC at 0.8, and investment at $3 trillion, the equilibrium GDP can be calculated using the above formulas to find that it is $20 trillion.
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