Question

Mention the differences between accelerator and multiplier effect.

Answer 1

Accelerator Effect Multiplier Effect:

1. The accelerator is the numerical value of the relation between an increase in consumption and the resulting increasing in Investment. The multiplier is the ration of the change in national income to change in Investment.
2. Accelerator  `(β) = "ΔI"/"ΔC"`
   ΔI = Change in Investment
   ΔC = Change in consumption demand Multiplier (K) = `"ΔI"/"ΔC"`
   ΔI = Increase in Investment ΔY = Increase in Income ΔY results from ΔI
3. Accelerator Effects are –

1. Increase in consumer demand.
2. Films get close to fill capacity.
3. Film invest to meet rising demand. Multiplier Effects are

Multiplier Effect:

1. Multiplier is the ratio of the change in national income to change in Investment.
2. Multiplier:
   Multiplier (K) =`"ΔY"/"ΔI"`
   ΔI = Increase in Investment
   ΔY = Increase in Income
   ΔY results from ΔI

Multiplier Effects are:

1. Positive Multiplier an initial increase is an injection (or a decrease in a leakage) that leads to a greater final increase in real GDP.
2. Negative Multiplier an initial increase in an injection (or an increase in a leakage) leads to a greater final decrease in real GDP.