A country's consumption function described as
C = 500 + 0.7Y
the Autonomous consumption
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → 500
In the consumption function C = \( \overline{C} \) + cY, the constant term is autonomous consumption. It is the consumption that takes place even when income is zero.
In C = 500 + 0.7Y, put Y = 0. Then C = 500, so autonomous consumption is 500. The 0.7 is the marginal propensity to consume (MPC), and 0.7Y is induced consumption.
Note: In the original NTA paper, Option (1) and Option (4) were both printed as 350. For the benefit of students and to ensure a single answer, Option (4) has been changed to 5000.
NCERT (2026-27): Introductory Macroeconomics — Chapter 4: Determination of Income and Employment
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