The accelerator describes

• A. When investment creates a continuous stimulation for economic growth
• B. A fixed rate of investment
• C. The multiplier effect
• D. The level of unemployment determines investment

Answer: (A)

The accelerator focuses on how investment responds to changes in the rate of output growth. When production and demand are rising, firms expect higher future sales and invest to expand capacity, which in turn helps sustain or accelerate that growth. This creates a reinforcing cycle where investment acts as a driver of ongoing economic expansion.

The best choice captures this idea by saying investment creates a continuous stimulation for economic growth. It emphasizes that investment fuels further growth through expanded productive capacity, rather than being a fixed, constant rate. It’s not about a fixed investment rate, nor is it about the multiplier, and unemployment isn’t the direct driver in this theory either.