Acceleration Principle


Acceleration Principle

An economic concept that draws a connection between output and capital investment. According to the acceleration principle, if demand for consumer goods increases, then the percentage change in the demand for machines and other investment necessary to make these goods will increase even more (and vice versa). In other words, if income increases, there will be a corresponding but magnified change in investment.

Also referred to as the accelerator principle.

The acceleration principle has the effect of exaggerating booms and recessions in the economy. This makes sense, as companies want to optimize their profits when they have a successful product, investing in more factories and capital investments to produce more. If a recession hits, they will reduce investment. This investment reduction can increase the length of the recession. This is because less investment means less jobs created, and so on.


Investment dictionary. . 2012.

Look at other dictionaries:

  • acceleration principle — noun : a principle in economics: an increase or decrease in income induces a corresponding change in investment * * * Econ. the principle that an increase in the demand for a finished product will create a greater demand for capital goods. Also… …   Useful english dictionary

  • acceleration principle —  Hypothesis that investment varies with the rate of change in aggregate demand. First introduced by John M. Clark in 1917, the principle was developed to explain the large variations in investment over the course of a business cycle. Keynes… …   American business jargon

  • acceleration principle — Econ. the principle that an increase in the demand for a finished product will create a greater demand for capital goods. Also called accelerator principle. [1940 45] * * * …   Universalium

  • acceleration principle — accelera′tion prin ciple n. bus the economic principle that an increase in the demand for a finished product will create a greater demand for capital goods. Also called accel′erator prin ciple • Etymology: 1940–45 …   From formal English to slang

  • acceleration principle — noun Date: circa 1941 a theory in economics: an increase or decrease in income induces a corresponding but magnified change in investment …   New Collegiate Dictionary

  • acceleration coefficient — Econ. the ratio of change in capital investment to the change in consumer spending. Also called accelerator, coefficient of acceleration. Cf. acceleration principle. * * * …   Universalium

  • acceleration coefficient — noun : accelerator 2 * * * Econ. the ratio of change in capital investment to the change in consumer spending. Also called accelerator, coefficient of acceleration. Cf. acceleration principle …   Useful english dictionary

  • Acceleration — Ac*cel er*a tion, n. [L. acceleratio: cf. F. acc[ e]l[ e]ration.] The act of accelerating, or the state of being accelerated; increase of motion or action; as, a falling body moves toward the earth with an acceleration of velocity; opposed to… …   The Collaborative International Dictionary of English

  • Acceleration — Ac*cel er*a tion, n. [L. acceleratio: cf. F. acc[ e]l[ e]ration.] The act of accelerating, or the state of being accelerated; increase of motion or action; as, a falling body moves toward the earth with an acceleration of velocity; opposed to… …   The Collaborative International Dictionary of English

  • Acceleration of the moon — Acceleration Ac*cel er*a tion, n. [L. acceleratio: cf. F. acc[ e]l[ e]ration.] The act of accelerating, or the state of being accelerated; increase of motion or action; as, a falling body moves toward the earth with an acceleration of velocity;… …   The Collaborative International Dictionary of English