Economic Literacy: 'Acceleration Principle'

Thursday, January 05, 2017

An economic concept that draws a connection between output and capital investment.

According to the acceleration principle, if demand for consumer goods increases, then the percentage change in the demand for machines and other investment necessary to make these goods will increase even more (and vice versa). 

In other words, if income increases, there will be a corresponding but magnified change in investment.

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