Answer Happy

Which of the following statements best describes the accelerator effect? (3 marks) (a) A rise in the national output increases national income, which in turn may increase consumption and encourage firms to invest more, resulting in a further increase in the aggregate demand and the national output. (b) A rise in the national output increases national income, which in turn may increase consumption and encourage firms to invest more, resulting in a further increase in the aggregate supply and the national output.
(c) When the government finances government spending through borrowing, this will push down rates of interest and thus cause private investment to increase. (d) When the government finances government spending through borrowing, this will push down rates of interest and thus cause consumption to increase.