Living Reference Work Entry

The New Palgrave Dictionary of Economics

pp 1-3

Date: Latest Version

Acceleration Principle

  • P. N. JunankarAffiliated with

Abstract

The acceleration principle holds that the demand for capital goods is a derived demand and that changes in the demand for output lead to changes in the demand for capital stock and, hence, lead to investment. The flexible accelerator, which includes both demand and supply elements, allows for lags in the adjustment of the actual capital stock towards the optimal level. The principle neglects technological change but has been used successfully in explaining investment behaviour and cyclical behaviour in a capitalist economy. Almost all macroeconomic models of the economy employ some variant of it to explain aggregate investment.

Keywords

Acceleration principle Aftalion, A. Aggregate demand Aggregate investment Business cycles Capital–output coefficient Chenery, H. B. Clark, J. M. Depreciation Derived demand Distributed lag accelerator Eisner, R. Expectations Haberler, G. Harrod, R. F. Harrod–Domar growth model Marx, K. H. Pigou, A.C. Technical change

JEL Classifications

E22