accelerator: The accelerator is a causal relationship between increases in aggregate demand and national output(ΔQ), and the resulting increase in net investment (ΔI). Net investment is a function of the change in output rather than the level of national output. ΔAD à ΔQ à ΔI à AD à ΔQ à ΔI, and the momentum for sustained economic growth builds.
The multiplier process relies on the fact that any increase in autonomous spending creates income, which generates further consumer spending, creating more income, and so on. New investment may also be triggered by increased spending.
An investment accelerator exerts pressure for accelerated income growth when rising consumption and income stimulate new capital investment.
New autonomous spending causes investment to accelerate, so that Aggregate Spending is both multiplied by induced consumption and accelerated by induced investment. Thus, a change in autonomous spending may increase income by even more than the multiplier effect alone. (More sophisticated Keynesian models than any considered on these web pages explain how interactions between investment accelerators and multiplier processes may destabilize Aggregate Expenditures.) |
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