If the consumption function is defined as C = 7,250 + 0.8Y, what is the autonomous level of consumption expenditure?

What is a private cost of production? What is a social cost of production? When is the private cost of production equal to the social cost of production?

What will be an ideal response?

Suppose that consumers become more pessimistic about the future and, as a result, reduce their consumption by $10 billion. If the marginal propensity to consume is 0.80, how will this $10 billion reduction in consumption affect the equilibrium level of real GDP?

A. Real GDP will decrease by $8 billion. B. Real GDP will decrease by $10 billion. C. Real GDP will decrease by $40 billion. D. Real GDP will decrease by $50 billion.