The Impact of an Increase in Autonomous Investment on Real GDP

What will be the impact on real GDP if autonomous investment increases by 60 billion?

A. It will decrease by $24 billion

B. It will increase by $24 billion

Answer:

The correct answer is B. If autonomous investment increases by 60 billion, the impact on real GDP will be an increase of $24 billion.

Autonomous investment refers to an increase in investment that is not based on changes in income or other factors. When autonomous investment increases by 60 billion, it means there is an initial injection of spending into the economy that leads to further economic activity.

This injection of funds leads to an increase in production and output, which, in turn, impacts the country's Gross Domestic Product (GDP). Real GDP measures the total value of all goods and services produced in an economy adjusted for inflation, providing a more accurate reflection of an economy's performance.

Therefore, when autonomous investment increases by 60 billion, the overall impact on real GDP would be an increase by $24 billion. This demonstrates the positive effect that increased investment can have on economic growth and output.