Question 1
The accelerator theory of investment states that the level of investment depends upon the
◦ level of GDP.
◦ level of saving.
◦ size of changes in GDP.
◦ rate of interest.
Question 2
The accelerator theory suggests that
◦ exports are volatile and will magnify a business cycle.
◦ inflation will rise if unemployment is held below the natural rate.
◦ investment is volatile and will magnify a business cycle.
◦ inflation is volatile and will magnify a business cycle.