What is expenditure cycle?
The expenditure cycle is a process that individual customers and companies use in finalizing their purchase. It often involves comparing prices, researching the product and determining their own need for the product.
Recurrent or Revenue Expenditure are those expenditure the benefits of which are utilized by company in one single year and capital expenditure are those expenditure the benefits of which are utilized for morethan one fiscal year. Revenue expenditure Example: Inventory etc Capital Expenditure : plant, machinery, building etc.
AUTONOMOUS AND INDUCED EXPENDITURE : Autonomous expenditure is independent of changes in real GDP, whereas induced expenditure varies as real GDP changes. In general, a change in autonomous expenditure creates a change in real GDP, which in turn creates a change in induced expenditure. The induced changes are at the heart of the multiplier effect. Induced expenditure is the sum of the components of aggregate expenditure that change with GDP. ♦ Autonomous expenditure is the…