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.

  1. Autonomous Investment

    Autonomous investment is an investment in a country that made ...
  2. Capital Expenditure (CAPEX)

    Capital expenditure, or CapEx, are funds used by a company to ...
  3. Personal Income

    Personal income is the total compensation received by an individual. ...
  4. Income

    Income is money that an individual or business receives on a ...
  5. Permanent Income Hypothesis

    Permanent income hypothesis is a theory of consumer spending ...
  6. Cash Flow To Capital Expenditures ...

    A ratio that measures a company's ability to acquire long term ...
Related Articles
  1. Insights

    Lyft Co-Founder Refutes Elon Musk's Vision of the Future (TSLA)

    In a Medium post on Sunday, Lyft Co-Founder John Zimmer argued for a driverless future with a Lyft network at the center of it.
  2. Tech

    Toyota Looks to Blockchain To Make Self-Driving Cars

    Is there no end to the uses of Blockchain technology?
  3. Personal Finance

    Automatic Saving or Intentional Budgeting?

    While tracking expenses may work for some, automatic savings may work better for others.
  4. Managing Wealth

    Increase Your Disposable Income

    Here are four quick and easy ways to up your spending money.
  5. Personal Finance

    How the Future of Driverless Trucks Impacts the Global Economy

    A successful cross-border trip of a convoy of self-driving trucks across Europe gives insight to a future of autonomous vehicles to replace human drivers.
  6. Insurance

    How Do Your Finances Stack Up?

    We look at the average consumer numbers, so you can get some perspective on how you spend your hard-earned dollars.
  7. Small Business

    7 Companies With Big Advertising Budgets

    Here's what the corporations with some of the biggest advertising budgets in the U.S. spend their money on.
  8. Investing

    IBM Patents a Clever Self-Driving Car Innovation

    IBM (NYSE: IBM) has received a patent on a new learning system that lets control of a self-driving vehicle shift between a human and an artificial intelligence-based driver in the event of an ...
  1. What is the difference between induced consumption and autonomous consumption?

    Explore the difference between autonomous consumption and induced consumption. Simplify the world of economics by understanding ... Read Answer >>
  2. Why is it that under some circumstances, capital expenditure cannot be tax-deducted ...

    Understand the meaning of capital expenditures, and learn what the implications are for companies resulting from tax laws ... Read Answer >>
  3. How does revolving credit differ from a general line of credit?

    Examine the consumer goods sector, which accounts for nearly one-third of consumer spending, and learn which goods account ... Read Answer >>
  4. Are Social Security payments included in the US GDP calculation?

    Understand how gross domestic product is calculated and whether or not transfer payments such as Social Security are included ... Read Answer >>
  5. Why do companies often treat events such as the purchase of an asset or construction ...

    Understand the capitalized costs of fixed assets and learn how they are reflected on a company's balance sheet and income ... Read Answer >>
  6. Is it wise for a company to have heavy cash flow investing activities outside of ...

    Learn if it's wise for a company to have heavy cash flow from investing activities outside of its capital expenditures. Understand ... Read Answer >>
Hot Definitions
  1. Federal Funds Rate

    The federal funds rate is the interest rate at which a depository institution lends funds maintained at the Federal Reserve ...
  2. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  3. Standard Deviation

    A measure of the dispersion of a set of data from its mean, calculated as the square root of the variance. The more spread ...
  4. Entrepreneur

    An entrepreneur is an individual who founds and runs a small business and assumes all the risk and reward of the venture.
  5. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  6. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
Trading Center