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Questions
Distinguish between autonomous investment and induced investment.
Explain the difference between induced investment and autonomous investment.
Distinguish Between
Explain
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Solution
| Autonomous Investment | Induced Investment | |
| 1. | It represents that part of investment that is independent of the income level and interest rate. | It is a dependent function of the income and interest rate. |
| 2. | It is income inelastic, meaning it does not change with changes in income. | It is not income inelastic; it changes as income changes. |
| 3. | It remains constant throughout all levels of income and interest rates. | It is a positive function of income, but is a negative function of the rate of interest. |
| 4. | It remains constant across different levels of income and interest rates. | It is a positive function of income and a negative function of interest rate. |
| 5. | Generally made for social welfare or essential infrastructure. | Made to maximize profit, influenced by market demand and profitability. |
| 6. | Government investment in roads, hospitals, defense, etc. | Private investment in factories, housing, or machinery increases as income and demand increase. |
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