Autonomous Expenditure - Explained
What is an Autonomous Expenditure?
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Table of ContentsWhat is an Autonomous Expenditure?Why is Autonomous Expenditure ImportantAcademics Research on Autonomous Expenditure
What is an Autonomous Expenditure?
Autonomous expenditure simply refers to spending that must be done, regardless of income. It is the minimum spending by an individual or the government when income is at level zero.
Back to: ECONOMIC ANALYSIS & MONETARY POLICY
Why is Autonomous Expenditure Important
An Autonomous expenditure by an individual or government refers to spending in an economy that is mandatory. The real level of income of an individual or a country does not affect autonomous expenditure. According to classical economic theory, autonomous spending affects the aggregate output of an economy. As such, the rise or decline in autonomous spending will translate to the same in the aggregate output.
A change in the level of income, whether positive or negative, does not cause a change in autonomous expenditure. For instance, autonomous expenditure for an individual could be food purchase, house costs, payment of utility bills and others. The amount of income directed towards autonomous expenditures might be adjusted when there is a decline in the level of income, they still remain mandatory spending. For instance, individuals might reduce or change their food habits, live in smaller apartments, cut off some utilities among others, but these expenditures are ever-present. So, even when changes in income level affect how the expenses are met, the needs remain unchanged. For the government, autonomous expenditure is associated with self-governance and the ability to meet basic needs. For instance, humans cannot do without food or shelter. This is important to their ability to live and is therefore autonomous. Expenditure that is not necessary or mandatory is regarded as non-essential and can be categorized as discretionary spending or a discretionary expenditure. Autonomous Expenditure and autonomous consumption go hand in hand, as the latter concerns what is mandatory or absolutely necessary amount of consumption by and individual or people. They are needs that are not affected by the level of income. The majority of government spending is considered to be mandatory or autonomous spending. Such as the provision of basic amenities and infrastructure, good health care, road networks, and others. Autonomous expenditure for the government has a strong connection with its autonomy, it goes a long way in determining how well a country is able to meet its basic needs.
- Fiscal Policy
- Expansionary vs Contractionary Fiscal Policy
- Stabilization Policy
- Robin Hood Effect
- Ricardo Barro Effect
- Autonomous Spending
- Autonomous Consumption
- Golden Rule
- Ricardian Equivalence
- Balanced Budget - Deficit and Surplus
- National Debt
- Standardized Employment Budget
- Deficit Hawk
- Twin Deficits