According to the accelerator theory of investment, if the annual rate of growth of real GDP in an economy slows from 6% to 2% while remaining positive, the level of planned net investment is most likely to:
rise, because real GDP continues to increase.
fall, because the absolute increase in national output is smaller than in the previous period.
remain constant, as long as the capital-output ratio remains unchanged.
become negative, because the capital stock must contract when growth slows down.
222 exam-style questions on AQA A Level Economics 2.2 How the macroeconomy works: the circular flow of income, aggregate demand/aggregate supply analysis and related concepts, covering 2.2.1 The circular flow of income, 2.2.2 Aggregate demand and aggregate supply analysis, 2.2.3 The determinants of aggregate demand, 2.2.4 Aggregate demand and the level of economic activity, 2.2.5 Determinants of short-run aggregate supply, and 2.2.6 Determinants of long-run aggregate supply. Each one has a worked solution and a mark scheme showing where the marks go.