According to the accelerator principle, business investment is influenced most directly by changes in
Correct answer: B. The rate of change in aggregate output
- A. The level of the money supply
- B. The rate of change in aggregate output
- C. The stock of foreign exchange reserves
- D. The average level of consumer prices
Explanation
The accelerator principle links investment to changes in output or demand rather than merely to the existing level of output. Faster growth in sales can encourage firms to expand productive capacity, causing investment to rise.
Report an error
The more specific you are, the faster it gets fixed. A source beats an opinion.
Prefer email? support@testustad.com
About Macroeconomics
The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
Practise Macroeconomics
1,499 free Macroeconomics MCQs from Economics, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Exams that ask Economics questions like this
Economics is on 3 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
More Macroeconomics questions
Unpaid household services, such as cooking performed by a family member, are generally excluded from GDP because they
The balanced-budget multiplier is generally equal to one when the government increases spending and taxes by the same amount because
A liquidity trap makes expansionary monetary policy less effective because
An improvement in technology, with other factors unchanged, shifts the long-run aggregate supply curve
Which situation best illustrates a structural budget deficit?
An economy's marginal propensity to save is 0.25. In the simple model, its expenditure multiplier is