Page 89 - DECO402_Macro Economics

Macroeconomic Theory

Notes can be inspired by the condition of favourable market or heavy sells. Entrepreneurs are thought about
its investment according to certain time period or decide objective.
Apposite it, unplanned investment is the forced investment of entrepreneurs. It happens, when some
non-saleable goods are collect because of short sells.
It is not necessary that realized investment is equals to the planned investment. Realized investment
is equals to the addition of planned or unplanned investment. When unplanned investment is equals
to zero, then realized investment is equals to the planned investment. Briefly,
Realized investment = planned investment + unplanned investment

4. Induced Investment and Autonomous Investment

The classifications of investment in induced and
autonomous investment are important in corporate
economic analysis. Investment that is dependent on
the profit expectation of entrepreneur called induced
investment. When entrepreneur hopes the fast sells of
produced goods with the help of capital goods, then they Investment
generate those capital goods or bring. That prediction is
depending on the level of income and effective demand
of customer. The level of employment is increase with
the increment in the level of income and so the demand
of customer goods is increased. That positive functional
relation between income and investment is show in Income
figure 10.1 by article. Figure 10.1: Induced Investment
In this figure, income is represented on X- axis and
investment is represented on Y-axis. The level of investment is increase Y I to Y I according to the
1 1
2 2
increment from OY to OY in income. So induced
2
1
investment income is elastic. The level of income is
such high, investment will more. Besides the income,
induced is depend on innovations, government policies,
integration and structure of popularity.
Autonomous investment is not effected by the level Investment
of income and rate of interest. Mostly investment of
population services (like railways, road, light, post and
wire) by government is related to that category and
division, since the investment of government is not
inspire by the only decisional profit or loss. Apposite
it, self investment autonomous is not more important. Income
Autonomous investment is flexible for interest; its
curve is parallel to X-axis. It shows in figure 10.2 by Figure 10.2: Autonomus Investment
dotted lines, which shows that the quantity investment
is similar on every level of income. Its curve is shifts to upward on the bases of change in technique,
search new resources, increment in population and budget allotment for investment. Collective
investment can get to add the induced and autonomous investment.

Did You Know? Consumption function is considers constant in short period in the analysis
of Keynes.

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