Question

What is the main assumption of the acceleration theory?​

Answer 1

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The principle of acceleration is based on the assumption that there is a constant ratio of the output of consumer goods and capital equipment needed for their production i.e., there is constant capital output ratio. In reality this ratio is not necessarily constant.

Answer 2

Answer:

The accelerator theory stipulates that capital investment outlay is a function of output. When faced with excess demand, the accelerator theory posits that companies typically choose to increase investment to meet their capital to output ratio, thereby increasing profits.