What Is Acceleration Principle, Accelerator-multiplier Model And Accelerator Coefficient?
Acceleration principle states that investment (other than autonomous investment such as government expenditure on roads, hospitals, etc) is related to output and that each level output requires a particular amount of capital stock to produce it. If output increases the capital stock must increase. A change in output therefore, induces investment in order to maintain the stock of capital at the required level. In essence, therefore, the principle states that in order to investment takes place, there must be an increase in output and plays down the role of the rate of interest in determining the level of investment Accelerator coefficient is a factor, which determines how much investment is induced by a change in output. Its value is influenced by the availability of spare capacity, the productivity of capital, the rate of interest, the price of labor etc. Accelerator-multiplier model is a model of economic growth, incorporating the effects of the acceleration principle and the multiplie
