Everything about Autonomous Consumption totally explained
Autonomous consumption is a term used to describe consumption expenditure that occurs when income levels are zero. Such consumption is considered
autonomous of income only when expenditure on these consumables doesn't vary with changes in income. If income levels are actually zero, this consumption counts as
dissaving, because it's financed by
borrowing or using up
savings.
Autonomous consumption is, by definition, the opposite of
induced consumption.
Autonomous Expenditures are unrelated to income; induced expenditures are directly related to income.
AE = AEο +mpcY
AE = Aggregate Expenditures
AEo = Autonomous Expenditures
mpc = Marginal Propensity to Consume = change in consumption/change in income
Y = Income
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