Which of the following is a primary implication of the accelerator theory of investment?

Question

Quizplus · Accepted Answer

The accelerator theory of investment states that changes in output are the primary factor that drives changes in investment. The theory suggests that a rise in output leads to a rise in investment, while a fall in output leads to a decline in investment. Therefore, for a high level of net investment to be maintained, rising levels of output are necessary. Option A is incorrect because desired and actual capital stocks need not be equal for net investment to occur. Option B is incorrect because gross investment can change if income changes. Option D is incorrect because only option C is correct.

Which of the Following Is a Primary Implication of the Accelerator