Accelerator effect

The Accelerator Effect
Definition The Accelerator Effect: The accelerator effect states that investment levels are related the rate of change of GDP.

If the economy is expanding, in other words, then the business sector invests in more capital goods to produce the extra output needed. This accelerator effect modifies and magnifies the simply multiplier effect based on the induced consumption and ...

See also: Tip, Capital goods, Long-run, Stats, Feedback