Accelerator-Multiplier Model

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Accelerator-Multiplier Model

A model for the business cycle at the macroeconomic level. The accelerator-multiplier model is cyclical and has three phases. First, the government increases its expenditures, which increases consumer income. The increase in income leads consumers to buy more goods and services, which increases economic output. The higher output leads to higher investment in the economy. As the name implies, it combines the Keynesian multiplier model with the accelerator model.
References in periodicals archive ?
Modern business cycle theory was born by Samuelson's (1939) multiplier accelerator model, which combined the newly arrived Keynesian multiplier analysis with the older principle of accelerator, demonstrating that the interaction between these two mechanisms may, in principle, yield fluctuations in economic activity.
The analysis developed in this paper is related to a simple Keynesian type multiplier accelerator model, which results after the inclusion of government's budget constraint and the monetary factor in Samuelson's classic business cycle model.
As in Samuelson's multiplier accelerator model, the oscillation of income is of constant amplitude when the product of marginal propensity to consume and the accelerator equal to unity.