Suppose in an economy there exist autonomous investments, which are independent of the level of income. Graphically, the autonomous investments curve would be __________.
(Choose the correct alternative to fill in the blank)
Suppose in an economy there exist autonomous investments, which are independent of the level of income. Graphically, the autonomous investments curve would be __________.
(Choose the correct alternative to fill in the blank)
Show Hint
- a straight line parallel to y-axis
- a straight line parallel to x-axis
- an upward sloping straight line at x-intercept, in the positive quadrant
- a downward sloping straight line at y-intercept
The Correct Option is B
Solution and Explanation
Autonomous investment is investment that does not depend on the level of income.
We must say how this looks on a graph with income on the x-axis and investment on the y-axis.
Step 2: Apply the concept:
Whatever the income is, the amount of investment stays the same, for example Rs. 100 crore at every income.
Plotting the same height for each income gives a flat line. A flat line is parallel to the x-axis.
Step 3: Check option (A):
A line parallel to the y-axis is vertical. It would mean income is fixed while investment changes. This is not autonomous investment. So (A) is wrong.
Step 4: Check option (B):
A line parallel to the x-axis is horizontal and shows constant investment at all incomes. So (B) is correct.
Step 5: Check option (C):
An upward sloping line shows investment rising with income. That is induced investment. So (C) is wrong.
Step 6: Check option (D):
A downward sloping line would show investment falling as income rises, which is not the case here. So (D) is wrong.
Final Answer:
The autonomous investment curve is a straight line parallel to the x-axis. The correct option is (B).
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