Multiplier And Accelerator Effect Flashcards
1
Q
What is the definition of the multiplier
A
Process by which any change in the components of AD will lead to an even greater change in national output
2
Q
What is the definition of the accelerator
A
Changes in investment can be directly linked to changes in the rate of GDP growth
3
Q
What is the multiplier equation
A
1
Multiplier = ————
1 - MPC
