Refer to the information provided in Figure 16.1 below to answer the questions that follow.
Figure 16.1
-Refer to Figure 16.1.Growth in aggregate output causes a ________ through the accelerator effect.

Question

Refer to the information provided in Figure 16.1 below to answer the questions that follow.
  Figure 16.1
-Refer to Figure 16.1.Growth in aggregate output causes a ________ through the accelerator effect.

Quizplus · Accepted Answer

The accelerator effect states that as aggregate output increases, firms will need to invest in capital goods to produce more goods and services, leading to an increase in investment spending. This increase in investment spending causes a larger shift in the IS curve. Therefore, growth in aggregate output causes a shift from I₃ to I₂ as shown in Figure 16.1.

Refer to the Information Provided in Figure 16