According to the accelerator effect, there is a tendency for investment to decrease when aggregate output decreases, thus accelerating the decline of output.

Question

Quizplus · Accepted Answer

The accelerator effect states that investment varies positively with changes in the level of output. This means that if aggregate output decreases, investment will also decrease, leading to a further decline in output through the accelerator effect.

According to the Accelerator Effect, There Is a Tendency for Investment