Accelerator principle

The accelerator principle (in German also "principle of acceleration") describes a process in which the investment volume of companies changes significantly, although the fluctuations in demand are relatively moderate. A demand impulse is therefore accelerated (accelerated) into investment activity.

The accelerator principle is thus a central element of Keynesian theory and empiricism, because it explains, on the one hand, why an increased demand can trigger an upswing, and on the other hand, why a decline in demand (contraction) leads to a downturn. Both arise through
Investors who are more optimistic or pessimistic about the return on their investments due to changes in demand. In the case of optimistic assumptions, companies often even increase their investments to a greater extent than demand has grown. In this way, they stimulate the economy and set an upward spiral in motion.

The opposite happens when the demand is depressed. The companies feel the lack of sales, become more pessimistic and their investments beyond the original decline in demand. The result is a downward spiral.

The accelerator principle explains why investments show significantly higher fluctuations than the other components of economic growth. It also underscores the importance of investment in economic turning points.

siehe auch Multiplier principle

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