For this question I put B as I thought that the multiplier is to do with how consumption affects national output, however the markscheme says that the answer is D. But I always thought that investments affect on national output was the accelerator effect? Would be great if someone could clear this up
- Thread Starter
- 10-04-2013 16:20
- 11-04-2013 00:09
The multiplier effect occurs when an increase in investment or any other autonomous expenditure(E.g. Government spending) leads to an even greater increase in national income.
The accelerator effect is like the opposite of the multiplier effect, it states that the level of planned investment is related to past changes in income.
Increase in investment... causes a greater change in income via the multiplier... this change in income causes increase future investment via the accelerator... starts over again