Macroeconomics: Autonomous Consumption, Planned Expenditure, and Monetary Policy

Economics 1
Macroeconomics
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Economics 2
Macroeconomics
PART A
1. The formula for computing the autonomous consumption will depend on the value of the
Consumption expenditure which is calculated as follows;
CE= Co + MPC (Yd),
And Yd which is the disposable income is calculated as follows;
Y-T-ty
MPC is the Marginal Propensity to Consume (MPC) whereas Autonomous Consumption is the
level of consumption that is not influenced by the income level.
262619 = Co + 0.6 (450179 -56700 -.028(450179),
Where 262619 is the Consumption expenditure, Co is the autonomous consumption, 0.6 is the
marginal propensity to consume (MPC), 56700 is the income level, 0.28 is the marginal
propensity to tax (MPT), and 450179 is the tax level. We can then say that;
262619 = Co + 0.6 (267428.88)
262619 = Co +16457.33
Co = 262619-16457.33 = $102161.7 million
2. Economically, Income is the aggregate Consumption added to saving. Since the value of
consumption is known, we can therefore say that;
S= Y-C

Economics 3
$ 450179 - $262619
S = $187560.0 million
3. Economically, Income is the aggregate Consumption added to saving. Since the value of
consumption is known, we can therefore say that;
I = Y-C
$ 450179 - $262619
= $187560.0 million
It therefore confirms the economic theory that proves that S=I
4. The value of autonomous export expenditure will not depend on the value of import made
locally, thus it is calculated as follows;
IE = Io + MPI(Y-T-ty)
Where Io is the autonomous import expenditure, MPE is the marginal propensity to Import, and
Yd = Y-T-ty
97424 = Io +0.1 (267428.88)
Io = 97424 -26742.89
=$70681.10 millions
5. The value of Net Export, NX is calculated as;
NX =Export –Import