Autonomous savings is the amount of money saved that does not change when national income changes. It represents savings that exist even if a person or household has zero income.
In economics, this is tied to autonomous consumption (the spending that happens regardless of income). The formula is S = -a + MPS × Y, where -a represents the autonomous savings.
Key features include:
- When households spend money even though they have zero income, the result is dissaving (negative autonomous savings).
- It explains that even at very low-income levels, people might protect their savings using prior wealth or savings accounts.
- In a savings function graph, it is shown as the intercept point.
- It demonstrates that saving behavior is based on two parts: autonomous factors (like culture or habits) and induced factors (which change depending on how much money you earn).
- Changes in autonomous savings shift the entire savings function, affecting the overall national income balance.