The accelerator theory of investment says that induced investment is determined by ?
Correct answer: C. the rate of change of national income
- A. the level of national income
- B. the level of aggregate demand
- C. the rate of change of national income
- D. expectations
Explanation
The accelerator principle links induced investment to changes in output or national income, not merely to its existing level. Faster growth in income therefore encourages more investment.
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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.
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