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Acceleration Principle

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.

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This chapter was originally published in The New Palgrave Dictionary of Economics, 2nd edition, 2008. Edited by Steven N. Durlauf and Lawrence E. Blume

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Junankar, P.N. (2008). Acceleration Principle. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95121-5_202-2

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  • DOI: https://doi.org/10.1057/978-1-349-95121-5_202-2

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  • Publisher Name: Palgrave Macmillan, London

  • Online ISBN: 978-1-349-95121-5

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Chapter History

  1. Latest

    Acceleration Principle
    Published:
    20 March 2017

    DOI: https://doi.org/10.1057/978-1-349-95121-5_202-2

  2. Original

    Acceleration Principle
    Published:
    07 October 2016

    DOI: https://doi.org/10.1057/978-1-349-95121-5_202-1