Investment
We have seen that a change in autonomous consumption could cause relatively larger fluctuations in equilibrium income, through its multiplier effect. This effect could be quite perverse. If a decrease in autonomous consumption were motivated by an intention to increase saving, this intention could be frustrated by a "paradox of thrift" -- that, instead of an increase in saving overall, the cut in autonomous consumption could lead to a decrease in income, forcing people to cut back saving to its original level.
Increases in autonomous consumption also have multiplier effects, so consumption may also play a key role in explaining booms as well as busts. These examples of changes in autonomous consumption also serve to illustrate that, more generally, changes in autonomous consumption can have relatively large impacts on equilibrium income through their multiplier effects.
Next, let's look at the results of changes in another component of autonomous spending: planned investment.
Investment
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