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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383

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BuyFindarrow_forward

Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383
Textbook Problem

Look at the Keynesian consumption function: C = C0 + (MPC × Yd). What part of it relates to autonomous consumption? What part of it relates to induced consumption? Define autonomous consumption and induced consumption.

To determine

Autonomous consumption and the induced consumption.

Explanation

The consumption function includes two different types of consumption factors, and they are the autonomous consumption and the induced consumption. The autonomous consumption is the consumption which is independent of the level of income of the consumer. The part of the consumption which is dependent on the level of income is known as the induced consumption. The consumption function can be written as follows:

C=C0+(MPC×Y

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