Both the multiplier effect and the investment accelerator tend to make the aggregate-demand curve shift further than it does due to an initial increase in government expenditures.

Question

Quizplus · Accepted Answer

The multiplier effect amplifies the impact of government spending on aggregate demand through increased consumption as people earn more, while the investment accelerator further increases investment in response to rising demand, both contributing to a larger shift in the aggregate-demand curve than the initial government expenditure alone would cause.

Both the Multiplier Effect and the Investment Accelerator Tend to Make