What is the theory of the accelerator?
Accelerator theory is a key economic concept used to predict economic growth and development. This theory is based on the idea that consumer trust and high demand for goods and services have a multiple effect on the economy. Stimulation demand and trust can speed up economic growth, leading to a continuing cycle of greater demand, investment and future growth. The accelerator theory serves as an important tool for economists and politicians who hope to determine effective strategies and politicians of economic growth.
American Thomas Nixon Carver and Bulgarian Albert Aftalion designed a version of accelerator theory during the early part of the 20th century. Although this theory preliminates to the Keynesian economy, it fits into the principles of the market that forms the hearts of Keynesian economic theory. Carver and Aftalion predicted that any politician that increased the summary demand and investment would have a far -reaching effect. Not only would the this policy stimulate short -term expenses, but it would also be t.o has been affected by long -term growth and expenditure through a multiplication effect.
For an example of how the accelerator theory works, consider a scenario where the government reduces interest rates in the country. Lower rates can encourage businesses to invest in new equipment and machines, because these things now seem more accessible for business. The company will have to hire new workers to produce and operate and operate in a new factory. This means that workers have more one -time income, leading to an increase in aggregated demand. This illustrates the initial short -term benefits of politics aimed at economic growth, but thanks to the theory of the accelerator, it also leads to even greater economic growth.
Increasing aggregated demand means people want to buy more goods and services. Rational, profit-seeking corporations will respond to this increase in aggregated demands by expanding the supply to satisfyJily demand. In order to expand the offer, it may have to invest in even more machines and equipment. This type of investment means another cycle of hiring and more one -time income in the hands of consumers.
Most economists predict that the accelerator theory also works the other way around. If consumer trust or aggregated demand affects due to poor planning or economic decline, companies are unlikely to invest in new equipment or workers. This results in a decline in available income and even greater intervention for aggregating demand.