THE MULTIPLIER AND ACCELERATOR EFFECT Flashcards
1
Q
How do you calculate the multiplier?
A
Change in national income / injection
2
Q
What is the accelerator effect?
A
Firms make an increased investment in capital goods, expecting to increase output and make a profit in the future
3
Q
When is the accelerator effect likely to occur?
A
When the economy is going through a recovery or at the start of a boom, so the times when demand is increasing and firms need to invest to meet this demand
