... independent of income are called autonomous consumption expenditure. (McTaggart, Findlay, Parkin ,1999, p.23-6) Income and Consumption are positively related but not in the same proportion. Consumption expenditure is mostly influenced by factors like -disposable income, expected future income, wealth and interest rates. Consumption expenditure is a function of real GDP. It is one of the most stable and the largest component of aggregate expenditure. Investment as an economic activity is taken, as in to increase output in the longer-run. It includes tangible capital and intangible (Nordhaus, 1998,p.748). Investment is independent of real GDP therefore it is an autonomous expenditure. It is also one of the most volatile components of aggregate expenditure. Investment and net exports fluctuate the most in aggregate expenditure. Out of consumption and investment; investment appears to be more volatile than consumption. Dependency of investment on real interest rates and profit expectations makes investment the most volatile factor. Now studying the ...

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