What term describes the portion of aggregate expenditure that is not influenced by economic output?

The term that describes the portion of aggregate expenditure that is not influenced by economic output is autonomous expenditure. Autonomous expenditure refers to the level of spending that occurs regardless of the current economic activity or output level. This includes essential spending categories such as basic consumer needs, certain government expenditures, and investments that do not vary directly with income levels.

The concept of autonomous expenditure is crucial in macroeconomic theory, particularly when analyzing the relationship between consumer spending and overall economic performance. It highlights that some level of spending will happen even if the economy is not performing well, ensuring that there is a baseline demand in the economy.

In contrast, induced expenditure refers to spending that varies directly with the level of income or output; as income rises, so does this type of expenditure. Investment expenditure is a component of aggregate expenditure, but it can be influenced by various factors, including economic conditions. Government spending, while a part of aggregate expenditure, may also change based on budgetary decisions and fiscal policy, making it not entirely autonomous.

Understanding autonomous expenditure is crucial for interpreting economic models and formulating policies aimed at stimulating growth, especially in periods of economic downturn.