CA Foundation · Business Economics · Determination of National Income
According to Keynes, which of the following is the main determinant of induced investment in an economy?
Induced investment mainly depends on the level of income and expected profits. When income and demand rise, firms expect higher profits and invest more, so investment moves with income. This differs from autonomous investment, which is independent of the income level.
- ALevel of income and profit expectations in the economyCorrect
- BGovernment's welfare spending on public goods
- CLevel of autonomous consumption of households
- DRate of growth of the money supply in foreign countries
Explanation
Induced investment is profit-motivated and varies with income or demand: higher income raises expected profits and so investment. Autonomous investment, by contrast, does not depend on income. The other options are not the standard determinants of induced investment.
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