PRC-3 · Chapter 15 · Question 2 of 44
In macroeconomic theory, while the Multiplier explains how Investment drives Consumption, the 'Accelerator' principle explains how:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) A change in the rate of Consumption induces a magnified change in future Investment
Explanation
The accelerator principle posits that if consumer demand grows rapidly, firms must build new factories to meet it, meaning an increase in consumption accelerates capital investment.
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