Accelerator theory refers to the theory of
A) investment that emphasizes that current investment spending depends positively on the expected future growth of government spending.
B) investment that emphasizes that current investment spending depends positively on the expected future growth of GDP.
C) consumption that emphasizes that current consumer spending depends positively on the expected future growth of GDP.
D) consumption that emphasizes that increases in consumption spending will result, through the multiplier effect, in greater increases in GDP.

Question

Quizplus · Accepted Answer

Accelerator theory emphasizes that current investment spending depends positively on the expected future growth of GDP. This is because firms will tend to invest more when they expect the economy to grow, which will increase demand for their goods and services. The accelerator theory is based on the idea that changes in investment spending can have a multiplier effect on GDP, as increased investment can lead to increased output and employment in other sectors of the economy.

Accelerator Theory Refers to the Theory of