ECONOMICS Lecture Notes - Business Cycle, Consumption Function, Joseph Schumpeter
9 Dec 2021
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Prof. samuelson constructed a multiplier-accelerator model assuming one period lag and different values for the mpc ( ) and the accelerator ( ) that result in changes in the level of income pertaining to five different types of fluctuations. The interaction of the multiplier and the accelerator has the merit of raising national income at a much faster rate than by either the multiplier or the accelerator alone. It serves as a useful tool not only for explaining business cycles but also as a guide to stabilization policy. The greater the value of the accelerator ( ), the greater is the chance of an explosive cycle. The greater the value of the multiplier, the greater the chance of a cycle less path. Yt = gt+ct+it (1) whereyt is national income y at time t which is the sum of government expenditure gt, consumption expenditure ctand induced investment it .
