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Presentation
 What is investment ?
 Type of investment
Types of investments
1. Autonomous investment
2. Induced investment
Autonomous Investment
 Autonomous investment means investment which does not change
with the changes in the income level and is therefore independent of
income.
 This autonomous investment includes expenditure on building, dams,
roads, canals, schools, hospitals, etc.
 Since investment on these projects is generally associated with public
policy, autonomous investment is regarded as public investment.
 This autonomous investment depends more on population growth and
technical progress than on the level of income.
Cont…
 Autonomous investment can be represented
diagrammatically as in the figure given below.
 This means that whatever the level of income
investment remains the same.
Induced investment
 Induced investment is that investment which is affected by the
changes in the level of income.
 The greater the level of income, the larger will be the consumption of
the community.
 In order to produce more consumer goods, more investment has to be
made in capital goods, so that greater output of consumer goods
become possible.
 This induced investment is undertaken both in fixed capital assets and
in inventories.
 The essence of induced investment is that greater income and
therefore greater aggregate demand affects the level of investment in
the economy.
Cont…
 Induced investment can be presented diagrammatically as
in the figure given below.
 The figure shows that as income increases investment also
increases and as income decreases investment also
decreases.
Thank You

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Introduction to investment function.

  • 1. Presentation  What is investment ?  Type of investment
  • 2.
  • 3. Types of investments 1. Autonomous investment 2. Induced investment
  • 4. Autonomous Investment  Autonomous investment means investment which does not change with the changes in the income level and is therefore independent of income.  This autonomous investment includes expenditure on building, dams, roads, canals, schools, hospitals, etc.  Since investment on these projects is generally associated with public policy, autonomous investment is regarded as public investment.  This autonomous investment depends more on population growth and technical progress than on the level of income.
  • 5. Cont…  Autonomous investment can be represented diagrammatically as in the figure given below.  This means that whatever the level of income investment remains the same.
  • 6. Induced investment  Induced investment is that investment which is affected by the changes in the level of income.  The greater the level of income, the larger will be the consumption of the community.  In order to produce more consumer goods, more investment has to be made in capital goods, so that greater output of consumer goods become possible.  This induced investment is undertaken both in fixed capital assets and in inventories.  The essence of induced investment is that greater income and therefore greater aggregate demand affects the level of investment in the economy.
  • 7. Cont…  Induced investment can be presented diagrammatically as in the figure given below.  The figure shows that as income increases investment also increases and as income decreases investment also decreases.