Explaining the Multiplier and the Accelerator

In this recorded revision webinar, I take students through the concepts of the Multiplier and Accelerator effects - two key topics in AS Macro Economics.

You can download the slides used in this revision webinar here.

Accelerator effect:

Where planned capital investment is linked positively to the past and expected growth of consumer demand or national income

Multiplier effect:

If there is an initial injection (e.g. a rise in exports), then the final increase in aggregate demand and real GDP will be greater. The size of the multiplier coefficient is affected by the marginal rate of withdrawal / leakage from the circular flow of income.