Question

Define investment. Differentiate between induced and autonomous investment.

Answer 1

In an economic sense, an investment is the purchase of goods that are not consumed today but are used in the future to create wealth. In finance, an investment is a monetary asset purchased with the idea that the asset will provide income in the future or will be sold at a higher price for a profit.

An autonomous investment consists of expenditures in a country or region that is independent of economic growth. They areinvestments made for the good of society and not for the goal of making profits. Autonomous investment is the opposite of inducedinvestment, which is not mandatory or compulsory.

Induced investment is that investment which is governed by income and amount of profit. The inducing factors are changes in income and profit. Where there is a possibility of increase in income and profit, the induced investment increases and when there is a decreased possibility of income and profit, the induced investment decreases. This implies that the induced investment is profit and income elastic. In simple language, when increase in investment is due to the increase in current level of income and production, it is known as induced investment.

Answer 2

the action or process of investing money for profit.
the surrounding of a place by a hostile force in order to besiege or blockade it.
Induced investment is that investment which is governed by income and amount of profit. ... Autonomous investment is that investment which is independent of the level of income or profit.