Which of the following assumptions of principle of acceleration are true ? A. Constant capital-output…
The simple accelerator assumes a constant capital-output ratio and a sustained increase in demand. Existing productive capacity must be fully used; otherwise output can rise…
Choose your answer
Which of the following assumptions of principle of acceleration are true ?
A. Constant capital-output ratio
B. Excess capacity exists in consumer-goods plants
C. Increased demand is permanent
Answer and explanation
Correct answer B
The simple accelerator assumes a constant capital-output ratio and a sustained increase in demand. Existing productive capacity must be fully used; otherwise output can rise without additional investment in capacity.
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RPSC School Lecturer (School Education)