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Homework answers / question archive / The information below relates to a closed economy without a government: Autonomous consumption = R285 million Autonomous investment = R300 million Marginal propensity to consume = 0

The information below relates to a closed economy without a government: Autonomous consumption = R285 million Autonomous investment = R300 million Marginal propensity to consume = 0

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The information below relates to a closed economy without a government:

  • Autonomous consumption = R285 million
  • Autonomous investment = R300 million
  • Marginal propensity to consume = 0.4

Calculate the level of autonomous spending.

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The level of autonomous spending is R585 million.

The formula used for autonomous spending is given below:

  • Autonomous spending = Autonomous consumption + Autonomous investment
  • Autonomous spending = R285 million + R300 million
  • Autonomous spending = R585 million

Note:

The marginal propensity to consume (0.4) found in the question is used to determine the size of the multiplier; it's irrelevant for determining the amount of autonomous spending.

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