Economics 9708 · AS & A Level · Economic growth
Explain the difference between autonomous investment and induced investment. Consider whether there is a link between these two types of investment.
‘Governments should focus on creating favourable conditions for firms in the private sector to invest. This would mean that all investment in an economy could be undertaken by firms in the private sector.’ How far would you support this view?
This 25-mark question has a full step-by-step worked solution and mark scheme. One marking point: “Responses should make a clear distinction between autonomous investment and induced investment, recognising that the former comes from outside the circular flow of income while the latter depends on changes in the level of income. There should also be some discussion of whether a link can be established between the two types of investment. That link should be based on the connection between the multiplier effect on income and the accelerator effect on investment.” …