Question

The Campbell family has a disposable income of $60,000 annually. Assume that their marginal propensity to consume is 0.8 (the Campbell family spends 80% of new disposable income on consumption) and that their autonomous consumption spending is equal to $10,000. What is the amount of the Campbell family\'s annual consumer spending?,

Answer 1

Given the Keynesian equation C=A+MD, we find 10000 + (0.8 x 60000) = $58000. M is the Marginal propensity to consume, the A is the Autonomous consumption, and D is disposable income, giving Annual consumer spending as C.