Acceleration Principle

Discipline: Economy

Acceleration principle is formulated by American economist John Maurice Clark (1884-1963).

Acceleration principle is a theory of investment in modern macroeconomics. It asserts that the level of investment is accelerated only through the rate of increase in output, which is the gross domestic product. Since the acceleration principle links investment to output, it is has explanatory value also in understanding the development of business cycles.

According to the acceleration principle, each level of output needs a specific amount of capital. Therefore, if output (and the capital required to procure the necessary machinery) is expected to rise, the amount of capital within an economy will also increase. The accelerator equation is:

I = Α Δt, where:

I is net investment in year t,
Α is the accelerator coefficient, and
Δt is the annual change in income.

Also see: Harrod-Domar growth model, trade cycle


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