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Accelerator effect and Multiplier effect

October 8, 2017

 

Accelerator effect- when an increase in demand for consumer goods causes an increases in demand for capital goods (machines).

Example- If demand for Pizza goes up, then the demand for ovens would go up.

 

 

 

Multiplier effect- When you buy a TV you create jobs. How?

The person making the TV now has a job that would not otherwise be there had you not bought a TV. That person now has an income so he goes and buys a new sofa, therefore the person making sofas now has a job and so it carries on. In simple words spending encourages further rounds of spending or one person's spending is another's income.

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