PRC-3 · Chapter 15 · Question 32 of 44
The 'Accelerator Theory' differs from the Multiplier by focusing on investment. It states that:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Net investment is positive and rising when consumer demand/output is rising at an increasing rate
Explanation
The accelerator principle posits that firms are induced to radically accelerate their capital investment (build new factories) when they see consumer demand growing rapidly.
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