Page 104 - DECO402_Macro Economics

Unit-11: The Theory of Acceleration

Third, on the bases of working assumption on whole capacity of economies, being little bit increment Notes
in relative production, investment will relatively more increase. Its mean is that economics will have
to increase always increment rate for continue increment.
Fourth, it is clear by the table 1 and figures 11.1 that by the operation of accelerator, investment and
production move in single cyclical structure. In starting both are increases by slow motion, then fast
motion and in last loss is started.
Last, if the rules of accelerator shows in MEC and MEI curve then both curve (that are related to capital
stock and investment) will shift upwards.

Self Assessment
State whether the following statements are True or False:

7. The theory of Acceleration considers that sources are available.
8. Sources should be flexible because it can use in capital things industries
9. The theory of Acceleration considers that the supply of credit is not flexible.
10. The theory of Acceleration is not only unsatisfactory but also unreal as the description of
timing of investment.

11.3 Summary

y Despite this limit the rule of Acceleration makes more real and clear the process of income
breeding expect of multiplier principle. Multiplier shows the effect of change in investment on
income by the consumption way, but accelerator show the consumption effects on investment
or income. Therefore, the acceleration explains the fast fluctuations in income and employment
on the fluctuations in capital goods industries. But it can explain the turn point of upward more
good expect of the downward turn point. To understand the cyclical fluctuations Samulsan,
Hicks and Goodwin mix the acceleration and multiplier for the analysis of income breeding.

11.4 Keywords

y Acceleration—increase the speed.
y Accelerator—festinate.

11.5 Review Questions

1. What is the mean of the theory of acceleration?
2. Draw the table of the Operation of the Acceleration Principle.
3. Define the investment principle of the theory of acceleration.

Answers: Self Assessment

1. J. M. Clark 2. ratio 3. (a) 4. (b)
5. (a) 6. (b) 7. True 8. True
9. False 10. True.

LOVELY PROFESSIONAL UNIVERSITY 97