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  • Aggregate Demand Equation in the Simplified Model

Autonomous Demand

Autonomous demand is the portion of aggregate demand that is independent of the level of income or output. In the simplified multiplier model, it is calculated as the sum of autonomous consumption (c0c_0) and exogenous investment (II). The formula is: Autonomous Demand = c0+Ic_0 + I. This represents the total planned spending that would occur in the economy even if income were zero.

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References

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Economics

Economy

Introduction to Macroeconomics Course

Ch.3 Aggregate demand and the multiplier model - The Economy 2.0 Macroeconomics @ CORE Econ

The Economy 2.0 Macroeconomics @ CORE Econ

CORE Econ

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Learn After

  • In a simplified model of a closed economy with no government sector, the consumption function is described by the equation C = 200 + 0.75Y, where C is total consumption and Y is total income. Planned investment (I) is fixed at 150. Based on this information, what is the total level of spending that would occur if national income were zero?

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