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  • Song Her

    Accelerator HL

    April 8, 2010 by Song Her

    The acclerator is very similar to the multiplier. The accelerator theory of in vestmet assumes that firms past output levels from the basis for expectattions of future needs for capital. in vestment is assumed to primarily lnked to changes in demand for output rather than a a change in interest rates. Firstly, investment expenditure is both highly connected to aggergate demand and also far more volatile than demand changes. Investment changes far more than the change in demand, which serves to increase the fluctuations in a business cycle. Secondly, once output starts to rise, it must contunie to rise at the rate in order fir investment to ramin comstant. Slower growth rate will cause a decline in investment. Whereas a hihger growth ra…

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