What is meant by autonomous investment and induced investment?
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AUTONOMOUS INVESTMENT
The autonomous investment is not determined by consideration of profit. Instead, it is determined by consideration of the social welfare. In the times of economic depressions, the governments try to boost the autonomous investment. Thus, autonomous investment is one of the key concepts in welfare economics.
INDUCED INVESTMENT
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.
The autonomous investment is not determined by consideration of profit. Instead, it is determined by consideration of the social welfare. In the times of economic depressions, the governments try to boost the autonomous investment. Thus, autonomous investment is one of the key concepts in welfare economics.
INDUCED INVESTMENT
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.
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