Accelerator Effect
Updated 2026-08-08
INTRODUCTION
English translation pending.
CORE DEFINITION
The accelerator effect holds that firms target a desired ratio of capital to output, so investment responds to changes in output rather than to its level. A small rise in demand therefore triggers a much larger increase in capital spending, and a small fall triggers a sharp cut. Because investment decisions respond with a lag and are driven by the rate of change, the effect contains a built-in amplifying mechanism. Combined with the multiplier, which links income to consumption, it helps explain why booms and recessions overshoot.
SCAFFOLDING EFFECT
Reduce cognitive load
- Watch the delta: track the rate of change in sales, not the absolute level. - Scale the response: estimate how much capital spending the change implies at your capital coefficient. - Mind the lag: remember that investment arrives after the demand signal, so timing can misfire.
Anchor fast decisions
Firms hold a desired capital-output ratio, so when demand changes they adjust the capital stock toward the new requirement. Because the adjustment is to the change rather than to the level, a modest increase in sales can require a large volume of new investment, and a modest decline can halt it entirely. Investment also reacts with a delay, since capacity is planned and built after the demand signal appears. The result is a cycle that swings far more widely than the underlying change in demand would suggest.
MINIMUM ACTION
In progress 0/1Practice this model in one real situation:
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Source support: Explicit
- en.wikipedia.orghttps://en.wikipedia.org/wiki/Accelerator_effectverified
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