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6 January, 17:30

In a certain economy, the components of planned spending are given by:

C = 500 + 0.8 (Y - T) - 300r

Ip = 200 - 400r

G = 200

NX = 10

T = 150

Given the information about the economy above, which expression below gives autonomous expenditures?

A. [910 - 700r]

B. [760 - 700r]

C. 0.8Y

D. [790 - 700r]

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Answers (1)
  1. 6 January, 19:31
    0
    B) 790-700r

    Explanation:

    Aggregate Expenditure is the expenditure by all the sectors of economy. By Households = Consumption (C), By Firms = Investment (I), By government = Govt spending (G) & tax leakages (T), By Rest world = Next Exports (NX).

    Autonomous Expenditure is the level of expenditure in economy, which doesn't depend on level of Income = Y.

    AE = C + I + G + NX

    [500 + 0.8 (Y-150) - 300r] + [200 - 400r] + 200 + 10

    500 + 0.8Y - 120 - 300r + 200 - 400r + 210

    500 - 120 + 200 + 210 - 300r - 400r + 0.8y

    790 - 700r + 0.8y

    As, it can be seen that the part of AE = '790 - 700r', excluding '0.8y' : is not dependent on Income Y. So, it is Autonomous Expenditure
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Home » Business » In a certain economy, the components of planned spending are given by: C = 500 + 0.8 (Y - T) - 300r Ip = 200 - 400r G = 200 NX = 10 T = 150 Given the information about the economy above, which expression below gives autonomous expenditures? A.
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