Consider the following information describing a closed economy with no government and where aggregate output is demand determined. All dollar figures are in billions.
1.
the equilibrium condition is Y = C + I
2.
the marginal propensity to consume is 0.90
3.
the autonomous part of C is $300
4.
investment is autonomous and is $100

TABLE 21minus3
Refer to Table 21minus3. Suppose this economy is in equilibrium. There is then a significant decline in house prices across the country. The likely effect is
A.
autonomous consumption will fall below $300 billion and equilibrium national income will therefore fall.
Your answer is correct. B.
autonomous saving will rise and equilibrium national income will therefore rise.
C.
autonomous saving will fall and equilibrium national income will therefore fall.
D.
autonomous investment will rise and equilibrium national income will therefore rise.
E.
autonomous consumption will rise above $300 billion and equilibrium national income will therefore rise.