Accelerator effect

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In economics, the acceleration effect is defined as the positive effect of market economic growth on private fixed investment, for example, compared with the total change in domestic output. More GDP makes society more prosperous as businesses see profits rise. This change manifests itself in an increase in sales and earnings that now maximizes the benefits of capacity. This usually manifests itself in desirable profits and an increase in the profits of the business. It also entices firms to build more factories and other buildings, spending known as fixed investment. In addition, it will attract more customers to consume, which is called the multiplier effect in economics. This change has an excellent improvement to the social economy.

Each company has specific strategies that aim to maximize the amount of money available(Yu Sandy,2020).^[1] And not just smoothly changing from a different model of machine. This means that the goal of every company is to make more money, not just change machines and buildings. The concept of accelerator theory was developed by "Thomas Nixon Carver" and "Albert Aftalion" before Keynesian economics began to be implemented. Still, Keynesian theory became more and more famous in economics. Some people praised it. They opposed it because it was thought to eliminate all possibility of demand control through price control.

Acceleration can be wrong, too: the reduction and decline in GDP can be insufficient for corporate profits, sales, cash flow, productivity use and budgets. All this will depress fixed investment, causing the recession to come earlier through the multiplier effect.

The acceleration effect is the best social phenomenon when the economy is undergoing bad changes or is already below production (Jui-Chuan Chang, 2007).^[2] This is because, in aggregate demand, all available Labour is at its highest level. At the same time, it is easier to get more money and natural resources. It is more conducive to the improvement and development of science and technology.

Compare the multiplier effect with the acceleration effect <! The opening paragraph is not quite right. Welcome to discuss on the discussion page. --> Acceleration is defined as the fact that a variable moves faster and faster toward its expected value relative to time. Usually, the variable is equity. Keynes model does not consider fixed capital, thus accelerating factor into the reciprocal of multiplier, capital degraded into investment decisions. In the more common theory, capital decisions determine the required level of capital stock (including fixed capital and working capital). It is then determined by investment decisions, the cycle of the sequence of changes in the capital stock. Accelerating effects occur when current and previous gaps affect current investments. The Aviation - Clarke accelerator V has one such form < math.h > I_ {t} \ \ sum_ mu v = {I = 1} ^ {infty} \ left (1 -), mu, right ^ {I} \ left (Y_ {I} t - - Y_ {t - I - 1}} \ right) < math.h >, and Keynesian multiplier m there is such a form < math.h > Y_ {t} = mI_ {t} = \ frac {1} {1} the MPC I_ {t} < math.h > where "the MPC is the marginal propensity to consume. Hayek has well explained the concept of an accelerator. In addition, Tamara Peneva Todorova and Marin Kutrolli (2019,368) argue that the emergence of the multiplier effect makes the Keynesian theory more convincing.^[3] Imagine that when all the variables disappeared, taxes, imports, and so on, all the conclusions in multiplier theory were consistent with the Keynesian basis. At the same time, under the influence of the accelerator effect, whether the number of subjects is enlarged or reduced, the conclusion is not affected.

Business cycle and acceleration effect[]

As a simple model of the acceleration effect shows, more and more income accelerates capital accumulation. At the same time, the decrease in income makes the capital depleting faster. In both cases mentioned above, changes can occur that make the system unstable or periodic (Minsky & Papadimitriou , 2004).^[4] As a result, many types of business cycle model belongs to the two classes models.

Accelerator model[]

The "simple accelerator model expresses the accelerator effect". The model assumes that the capital goods (" K ") of the inventory and flow. And the proportional to the production level (" Y ") :

"K" = "K" x "Y"

This means that if "k" (capital output ratio) is constant, an increase in Y requires an 'increase' in k. Is net investment, "I_n" equals:

"I_n" = "k" ×Δ "Y"

Assume "k" = 2(usually assume k is within (0,1)). This equation states that if Y goes up by 10, the net investment will be equal to 10×2 = 20, just as the accelerator effect implies. If Y only goes up by 5, then the equation says that the investment level is five times 2 = 10. This result means that, in a simple accelerator model, if production growth "slows", the fixed investment will "fall". "A decline in real production does not necessarily lead to a reduction in investment. "However, if slower production growth leads to lower investment, it will lead to lower output because aggregate demand is also lower." As a result, the simple accelerator model means that the interpretation of the recession, said the phenomenon of a transition to a recession. At the same time, economists Matsumoto Akio and Szidarovszky, Ferenc believe that the emergence of the accelerator model is also a way of making the Keynesian theory more convincing.^[5] The most critical factor influencing the cyclical change in economic activity is the change in aggregate demand. The emergence of the accelerator model greatly accelerates the time of the change.

In modern times, economists use a more complex investment "flexible accelerator model" to describe the acceleration effect (Yu Sandy, 2020). Enterprise is described as these views, engaged in fixed capital goods [] [net investment, to reduce the capital goods the" expectations " and the inventory of" existing "capital goods (" K" < sub > - 1 < / sub >) the gap between:

${\displaystyle I_{n}=x(K^{d}-K_{-1})}$

Where x is the coefficient representing the adjustment speed (1≥x≥0).

Mathematics: < > I_ {t} = \ \ sum_ mu v ^ {I = 1} {\ infty} \ leave (1 -, mu, right) ^ {I} \ leave (Y_ {I} - Y_ {t - I - 1} \ r) mathematics > < /

The following variables determine the projected stock of capital goods: They are expected margin, the expected output rate, interest rate (), the cost of financing and technology. As expected, changes in the level of growth come into play. This model shows the behaviour described by the accelerator effect, but not as extreme as the simple accelerators of the past data. Since one-time net investment is still there, the existing capital stock grows over time. At the same time, the "slowing" of output (GDP) growth will cause the gap between the expected "K" and the existing "K" to become smaller and smaller, or even become negative, resulting in less and less current net investment.

Obviously, ceteris paribus, an actual fall in output depresses the desired stock of capital goods and thus net investment. Similarly, a rise in output causes a rise in investment. Finally, if the desired capital stock is less than the actual stock, then net investment may be depressed for a long time.

By comparing the above analysis, in the "new classic accelerator model", expect equity by assuming that the profit and competition completely the output value of export production function. In Jorgenson's original model (1963), there is no acceleration effect, because the behavior of investment is the immediate, So the capital stock can jump.

See also[]

• Multiplier (economics)
• Spending multiplier
• Financial accelerator

References[]

Books[]

• Égert, Balázs, 2018. Business investment: Taking stock of the major policy drivers. Public sector economics, 42(2), pp.99–104.
• Jui-Chuan Chang, 2007. Financial Accelerator Effect and Macroeconomic Fluctuations. Third International Conference on Intelligent Information Hiding and Multimedia Signal Processing (IIH-MSP 2007), 2, pp.553–556.
• Matsumoto, Akio & Szidarovszky, Ferenc, 2015. Nonlinear multiplier–accelerator model with investment and consumption delays. Structural change and economic dynamics, 33, pp.1–9.
• Minsky, H.P. & Papadimitriou, D.B., 2004. Induced Investment and Business Cycles, Cheltenham: Edward Elgar Publishing Limited.
• Tamara Peneva TODOROVA & Marin KUTROLLI, 2019. An expanded multiplier-accelerator model. Journal of economics and political economy, 6(4), p.368.
• Yu, Sandy, 2020. How Do Accelerators Impact the Performance of High-Technology Ventures? Management Science, 66(2), pp.530–552.

Further reading[]

• Knox, A. D. (1970). "The Acceleration Principle and the Theory of Investment: A Survey". In Shapiro, Edward (ed.). Macroeconomics: Selected Readings. New York: Harcourt, Brace & World. pp. 49–74. ISBN 0-15-551207-2.

Related video[]

• https://m.youtube.com/watch?v=CVL05d75Mh0&pp=QACIAgA%3D
• https://m.youtube.com/watch?v=vxFYfumAAlY