Autonomous investment refers to the amount of investment that happens regardless of a country’s income level. It is spending that does not change even if the economy grows or shrinks.

Formula: I = Ī (where investment is independent of income Y)

Key features:

• It is driven by factors such as interest rates, new technology, population growth, and business expectations, rather than current income.
• It acts as a primary injection of money into the economy.
• In economic charts, it represents the starting point (intercept) of the investment function, remaining constant across different levels of income.
• It helps stabilize the economy. If investment were linked to income, the effect of the multiplier would change.
• Changes in this type of investment can shift the aggregate demand (AD) curve, directly impacting national income.
• If autonomous investment drops, for example due to fear of a recession, the AD curve shifts down, leading to lower national income.
• It is the opposite of induced investment, which is investment that specifically increases as national income rises.