Question : Keynes discusses the equilibrium level of output, using the concept of:
Option 1: autonomous investment
Option 2: induced investment
Option 3: both (a) and (b)
Option 4: none
Correct Answer: both (a) and (b)
Solution : The correct answer is (c) both (a) and (b)
Keynes introduces the concept of autonomous investment, which refers to investment spending that is independent of changes in income. Autonomous investment can be influenced by factors such as business expectations, government policies, and technological advancements.
Keynes also considers the concept of induced investment, which refers to investment spending that is influenced by changes in income. As income increases, businesses may choose to increase their investment spending to meet the growing demand.
By combining both autonomous investment and induced investment, Keynes analyzes how changes in aggregate demand, including changes in consumption and investment, impact the equilibrium level of output in an economy.
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