What is an 'Autonomous Expenditure'
Autonomous expenditure is a macroeconomic term used to describe the components of an economy's aggregate expenditure that are not impacted by that same economy's real level of income. This type of spending is considered automatic and necessary, whether occurring at the government level or the individual level. Classical economic theory states that a rise in autonomous expenditures will create at least an equivalent rise in aggregate output, such as GDP, if not a greater rise.
BREAKING DOWN 'Autonomous Expenditure'Some of the spending classes that are considered autonomous of income levels, which can counted as either individual income or taxation income, are government expenditures, investments, exports, and basic living expenses such as food and shelter.
An autonomous expenditure obligation must be met regardless of income. It is considered independent in nature, as the need does not vary even when incomes do. Often, these expenses are associated with the ability to maintain a state of autonomy. Autonomy, in regards to nations, includes the ability to be self-governing. For individuals, it refers to the ability to function within a certain level of societally acceptable independence.
To be considered an autonomous expenditure, the spending must generally be deemed necessary to maintain a base level of function or, in an individual sense, survival. Often, these expenses do not vary regardless of personal disposable income or national income. Autonomous expenditure is tied to autonomous consumption, including all of the financial obligations required to maintain a basic standard of living. All expenses beyond these are considered part of induced consumption, which is affected by changes in disposable income.
In cases in which personal income is insufficient, autonomous expenses still must be paid. These needs can be met through the use of personal savings, consumer borrowing mechanisms such as loans and credit cards, or various social services.
Autonomous Expenditures and Income Levels
While the obligations that qualify as autonomous expenditures do not vary, the amount of income directed toward them can. For example, in an individual sense, the need for food qualifies as an autonomous expenditure, though the need can be fulfilled in a variety of manners, ranging from the use of food stamps to eating every meal at a five-star restaurant. Even though income level may affect how the need is met, the need itself does not change.
Governments and Autonomous Expenditures
The vast majority of government spending qualifies as autonomous expenditures. This is due to the fact that the spending often relates strongly to the efficient running of a nation, making some of the expenditures required in order to maintain minimum standards.