The accelerator principle states that planned investment spending by firms is:

Question

Quizplus · Accepted Answer

According to the accelerator principle, planned investment spending by firms is positively related to the expected growth of real GDP. This is because firms are more likely to invest when they expect increased demand for their products as the economy grows. Similarly, if the expected growth of real GDP is low, firms may be less likely to invest as they anticipate weaker demand for their products.

The Accelerator Principle States That Planned Investment Spending by Firms