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    Could someone please explain the following
    - Multiplier effect
    - Acceleration effect
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    (Original post by Blyts-_)
    Could someone please explain the following
    - Multiplier effect
    - Acceleration effect

    Multiplier Effect:
    Money is injected into circular flow > this stimulates further spending > this leads to a bigger effect on output/employment etc.

    Accelerator Effect: Increase in national income > proportionately larger rise in investment.
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    The accelerator effect is when an increase in national income results in a proportionately larger rise in investment

    The multiplier is the ratio of change in equilibrium real output to the autonomous effect that brought it about. The multiplier is caused by injections to the circular flow of income such as Investment.


    This may help
    http://www.tutor2u.net/economics/rev...celerator.html

    Good luck if your exam is tomorrow!
 
 
 
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