If C = X + 0.6Y & Investment is ₹ 1,500, Equilibrium level of income in economy would be 4050. Find out the autonomous consumption.
Answer & explanation
Correct answer: option 3
C = X + 0.6Y : In this X represents autonomous Consumption, while 0.6 Y represents induced Consumption.
The equilibrium level of income (4,050) is achieved when aggregate demand (C + I) equals aggregate supply (Y).
i.e. Y= C + I
4050= X + 0.6*4050 + 1500
X= 4050-2430-1500
X= 120
Autonomous Consumption (X)= 120