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What is the accelerator effect?

The accelerator effect is when an change in GDP results in a larger than proprtional change in investment. 

This effect can be either positive or negative, hence why investment is often the most volatile component of GDP. 

An example of this can be found in Greece - in the period of 2010-11 GDP per capita decreased by -7.7%, whereas investment fell by 20.9%.

Caitlin B. A Level Economics tutor, GCSE French tutor, GCSE Economics...

2 years ago

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