Question

Explain the difference between exogenous autonomous and endogenous induced expenditure

Answer 1

Explanation:

Autonomous consumption is defined as expenditures taking place when disposable income levels are at zero. This consumption is typically used to fund consumer necessities, but it causes consumers to borrow money or withdraw from savings accounts.

Induced consumption, on the other hand, differs in that the amount of consumption varies based on income. As disposable income rises, so does the rate of induced consumption. This process applies to all normal goods and services. For induced consumption, disposable income is at zero when induced consumption is at zero. As the value of disposable income rises, it induces a similar rise in consumption.

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