The magnitude of cyclical fluctuations resulting from any initial shock to the economy will be greater

Question

Quizplus · Accepted Answer

The magnitude of cyclical fluctuations in the economy will be greater when both the multiplier and the accelerator have higher values. This is because the multiplier effect amplifies the initial change in investment or spending, and the accelerator effect further increases investment in response to changes in demand, leading to larger swings in economic activity.

The Magnitude of Cyclical Fluctuations Resulting from Any Initial Shock