accelerator
acceleratorA model relating investment to changes in output. The accelerator model asserts that firms invest more when output is rising and less when it is falling. This seems reasonable: a rise in demand leads some firms to produce more, and leads them and other firms to expect that demand will rise further. The rise in output raises the ratio of output to capacity, and the expectation of further rises in demand makes firms believe it would be profitable to have more capital equipment. Accelerator-type models do help empirically to explain variations in both fixed investment and investment in stocks and work in progress.
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