An autonomous term in an equation is a term that is independent of any (right-
Suppose for simplicity that government spending on goods and services, G, the amount of taxes the government collects, T, and the transfers the government provides, Tr, are all exogenous. Then:
Furthermore, since disposable income, YD, is GDP after subtracting taxes and adding transfers, then:
The income–
With a little algebraic manipulation, we get:
This equation gives us the following three multipliers:
the autonomous expenditure multiplier (also called simply “the multiplier”):
the autonomous taxation multiplier:
the autonomous transfers multiplier:
So, for example, if the marginal propensity to consume is 0.5, then the autonomous expenditure multiplier is equal to 2. This implies, all else the same, that a $100 billion increase in autonomous consumption (AC), planned investment (IPlanned), or government spending on goods and services (G) will result in a $200 billion increase in the income–