Economics • Economic BasicsMedium
What does the 'Accelerator Principle' in macroeconomics describe?
A. The relationship between changes in consumer demand and the resulting changes in investment spending.✓ Correct Answer
B. The speed at which the central bank adjusts interest rates.
C. The impact of government tax cuts on consumption velocity.
D. The rapid rise of inflation during economic booms.
💡 Solution & Explanation
The accelerator principle states that any shift in consumer demand triggers a magnified change in investment spending within the economy. This economic concept helps explain business cycle fluctuations and capital expenditure volatility. Macroeconomic multiplier and accelerator interactions are standard topics in economics papers.
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