Accelerator-multiplier model

Updated: Aug 20, 2021

A model of the trade cycle based on the interaction of the acceleration principle and the multiplier. A change in investment causes, through the multiplier, change in national income. This change in national income determines, through the acceleration principle, a leve! of investment. If this leve! is different from the leve! previously attained, there is a further change in investment, a further change in income, and so on. It is possible to show by a mathematical analysis of this process that it may · cause national income to vary cyclically over time.

Reference: The Penguin Dictionary of Economics, 3rd edt.

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