Extract C (lines 12–15) states: ‘As household consumption rebounds, firms in the service sector are experiencing a sharp rise in demand and capacity utilization. Under the accelerator theory, this growth in national income should trigger a substantial wave of capital investment.’
Explain how the accelerator process is likely to affect economic growth.
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.