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    Question

    The concept of the "Accelerator Principle" in

    macroeconomics explains the relationship between:
    A Interest rates and investment. Correct Answer Incorrect Answer
    B The level of income and the rate of investment. Correct Answer Incorrect Answer
    C Consumer spending and the multiplier. Correct Answer Incorrect Answer
    D Government spending and national income. Correct Answer Incorrect Answer
    E Money supply and price level. Correct Answer Incorrect Answer

    Solution

    The Accelerator Principle states that the level of net investment depends on the rate of change of national income or output, not its absolute level. It suggests that investment is induced by increases in output (I = v * ΔY, where 'v' is the accelerator coefficient).

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