Where does the interest rate fit into the accelerator hypothesis of investment?

Question

Quizplus · Accepted Answer

The interest rate helps determine the ratio of desired capital to expected sales, v*. The accelerator hypothesis assumes that investment is driven by changes in desired capital stock, which in turn is influenced by changes in expected sales. The ratio of desired capital to expected sales is represented by v*, which is derived from a number of factors including the interest rate. Therefore, the interest rate plays a role in determining the level of investment according to the accelerator hypothesis.

Where Does the Interest Rate Fit into the Accelerator Hypothesis