The simple accelerator theory suggests that investment will be rising when

Question

Quizplus · Accepted Answer

The simple accelerator theory proposes that investment is influenced by the rate of change of output (i.e., output growth). When the growth of output is high, investment tends to rise because firms need to increase their capacity to keep up with the increasing demand for goods and services. Therefore, the best choice is B, as it directly reflects the basic premise of the accelerator theory. Choice A (output is rising) is not necessarily linked to investment, and choice C (output is high) does not capture the dynamic nature of investment decision-making. Finally, choice D (the growth of output is high) is redundant, as it repeats the same concept as the correct answer (choice B).

The Simple Accelerator Theory Suggests That Investment Will Be Rising