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AUTONOMOUS AND INDUCEDEXPENDITURE :

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 sum of the components

of aggregate expenditure that do not

change when real GDP changes.

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