105-Accelerator_Revision_Worksheet

105-Accelerator_Revision_Worksheet - IB Economics...

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IB Economics www.tutor2u.com IB Economics www.tutor2u.com Accelerator Revision Worksheet This is a small topic area that is usually taught immediately after the multiplier. (Exam questions tend to ask about both models together). This is a higher-level topic from Section 3.4 of the syllabus. A revision worksheet on the multiplier can be found here: http://www.tutor2u.net/blog/index.php/ib-diploma/C339/ The Accelerator The accelerator model is closely linked to the multiplier . The model looks at the relationship between a rise in national income in an economy and the effect upon capital investment by firms. Planned capital investment by firms is linked to the growth in demand for goods and services . Thus when there is an injection into the circular flow the multiplier effect will cause consumers to demand a higher number of goods and services. To meet this increase in demand firms need to increase their capacity and thus capital investment takes place. This is known as induced investment .
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