Lesson plan

Accelerator effect

The accelerator effect in economics is a positive effect on private fixed investment of the growth of the market economy (measured e.g. by a change in gross domestic product (GDP)). Rising GDP (an economic boom or prosperity) implies that businesses in general see rising profits, increased sales and cash flow, and greater use of existing capacity. This usually implies that profit expectations and business confidence rise, encouraging businesses to build more factories and other buildings and to install more machinery. (This expenditure is called fixed investment.) This may lead to further growth of the economy through the stimulation of consumer incomes and purchases, i.e., via the multiplier effect. In essence, the accelerator effect proposes that investment levels are contingent on the pace of change in GDP rather than its absolute level. In simpler terms, it is the acceleration or deceleration of economic growth that shapes businesses' choices regarding investments. The accelerator effect operates in reverse as well: when the GDP declines (entering a recession), it negatively impacts business profits, sales, cash flow, capacity utilization, and expectations. Consequently, these factors discourage businesses from making fixed investments, which further intensifies the recession due to the multiplier effect.…

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Article summary

The accelerator effect in economics is a positive effect on private fixed investment of the growth of the market economy (measured e.g. by a change in gross domestic product (GDP)). Rising GDP (an economic boom or prosperity) implies that businesses in general see rising profits, increased sales and cash flow, and greater use of existing capacity. This usually implies that profit expectations and business confidence rise, encouraging businesses to build more factories and other buildings and to install more machinery. (This expenditure is called fixed investment.) This may lead to further growth of the economy through the stimulation of consumer incomes and purchases, i.e., via the multiplier effect. In essence, the accelerator effect proposes that investment levels are contingent on the pace of change in GDP rather than its absolute level. In simpler terms, it is the acceleration or deceleration of economic growth that shapes businesses' choices regarding investments. The accelerator effect operates in reverse as well: when the GDP declines (entering a recession), it negatively impacts business profits, sales, cash flow, capacity utilization, and expectations. Consequently, these factors discourage businesses from making fixed investments, which further intensifies the recession due to the multiplier effect.…

Key claims

  1. publication date: 1936 — source: Wikipedia · confidence 0.95

Discussion questions

  1. Summarise the article in your own words. Which single claim would you verify first, and why?
  2. The record states that the publication date is "1936". What evidence would count against this claim?
  3. Which claim in this article is most likely to be revised as the sources update? How would you check its current status?
  4. If two sources disagreed about one of these facts, what would you need in order to trust one over the other?

Bibliography

  1. Wikipedia https://en.wikipedia.org/w/index.php?oldid=1298180018

Key claims and bibliography are generated from the same tracked claims and sources as the article page.