According to the accelerator model, as GDP declines and the economy enters a recession, we should expect the level of net investment to

Question

Quizplus · Accepted Answer

According to the accelerator model, the level of net investment is closely related to the rate of change of GDP. When GDP declines, the level of net investment is expected to decline faster. If the decline is significant enough, the level of net investment can become negative, indicating that firms are disinvesting and reducing their productive capacity. Therefore, the correct answer is D - become negative.

According to the Accelerator Model, as GDP Declines and the Economy