Posted in Finance, Accounting and Economics Terms, Total Reads: 375
Definition: Autonomous Investment
Autonomous investment is the investment that does not change with the changes in income level and is therefore it is independent of the income. Investment in an economy raises the level of aggregate demand which in turn increases the level of employment and income.
The main objective of these investments are for doing well for the society and not for profit generation alone. Autonomous investment is the opposite of induced investment.
Generally investment decisions are dependent on output and Rate of Interest. However, in case of Autonomous Investment, investment is not governed by output or Interest Rate. Thus, Autonomous Investment is independent of the Level of the Income of the consumer.
Investments in roads, infrastructure, power, transport, communication which are undertaken by the government come under Autonomous investment. It depends more on technical progress and population growth which are long run factors.
According to Keynes investment can be divided into two types;