Answer:
The disposable income increases by $100, this means aggregate consumption will increase by $75 and autonomous consumption remains at $1000.
Step-by-step explanation:
We are given the following in the question:
where C is the consumption and YD is the disposable income.
If the disposable income increases by $100, then we can write
[tex]C(YD+100)-C(YD) = 1000 + 0.75(YD + 100) - (1000 + 0.75YD)\\C(YD+100)-C(YD) = 0.75(YD + 100-YD)\\C(YD+100)-C(YD) = 75[/tex]
Thus, the aggregate consumption will increase by $75.
Autonomous consumption is the consumption when customer makes no disposable income.
Thus, we put YD = 0
[tex]C(0) = 1000 + 0.75(0)\\C(0) = 1000[/tex]
Thus, the autonomous consumption is $1000.
The disposable income increases by $100, this means aggregate consumption will increase by $75 and autonomous consumption remains at $1000.
