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INDUCED EXPENDITURE: An aggregate expenditure (consumption, investment, government purchases, and net exports) that depends on national income or gross domestic product. These four aggregate expenditures are conveniently separated into two types, induced, which is our current topic of expenditures unrelated to national income or GDP, and autonomous expenditures, expenditures which are unrelated to national income or GDP. Induced expenditures are graphically depicted as the slope of the aggregate expenditures line, and depend in large part on the marginal propensity to consume. The induced relation between income and expenditures form the foundation of the multiplier effect triggered by changes in autonomous expenditures.
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INDUCED INVESTMENT Business investment expenditures that depend on income or production (especially national income and gross domestic product). That is, changes in income induce changes in investment. Induced investment reflects the observation that the business sector is inclined to reinvest profits (boosted by a growing economy) in capital goods. It is measured by the marginal propensity to invest (MPI) and is reflected by the positive slope of investment line. The alternative to induced investment is autonomous investment, which does not depend on income.
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Today, you are likely to spend a great deal of time at an auction wanting to buy either any book written by Isaac Asimov or a how-to book on building remote controlled airplanes. Be on the lookout for slightly overweight pizza delivery guys.
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John Maynard Keynes was born the same year Karl Marx died.
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