What Is The Multiplier And The Accelerator In Economics?


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Robin Burden Profile
Robin Burden answered
In economic terms, the multiplier can be described as the way income alters or varies, depending on changes in investment.

The 'acceleration effect' is best described as a process by which changes in investment or income affects the amount of capital circulating in an economy.

That's why multiplier and accelerator are often interlinked.

What is the multiplier and accelerator?
A multiplier is essentially just a ratio of change (it can be positive or negative, an increment or a decrement) in income. It is a way of gauging shifts in investment spending.

The accelerator is the term used to describe the economic effect that private investment has on the growth of a market. This can be measured in terms of GNP (Gross National Product).

In times of economic prosperity, a country's economy will see increases or 'acceleration' in various areas, including:

  • Profits
  • Sales
  • Cash flow
You may be interested in the following video, which explains the two concepts in some depth:

Anonymous Profile
Anonymous answered
Multiplier is the measure of how income varies with respect to change in investment.

It is given by ratio of change in income to change in investment. Accelerator shows how much the change in income has affected capital stock.

An increase in income will accelerate capital accumulation and fall in income will accelerate capital depletion.


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