Without government intervention, the interaction between the multiplier and accelerator could cause

Question

Quizplus · Accepted Answer

The interaction between the multiplier and accelerator can indeed cause various economic outcomes such as rapid contraction, cyclical fluctuations, or rapid expansion of aggregate demand, depending on the magnitudes of the marginal propensity to withdraw (MPW) and the accelerator coefficient. These factors influence how investment, consumption, and other economic variables respond to changes in income, leading to different economic scenarios.

Without Government Intervention, the Interaction Between the Multiplier and Accelerator