Answer to Question #239224 in Macroeconomics for raja

Question

Examine the similarities and dissimilarities between accelerator theory and flexible accelerator theory.

Answer 1

The difference between rigid accelerator theory and flexible accelerator theory is that the rigid accelerator claims that when there is an increase in investment, income is increased by a considerable amount. However, a flexible accelerator tends to be the numerical value of links between investment increase brought by income increase. 

The similarity between rigid accelerator theory and flexible accelerator theory is that as demand and production increase, firms invest to increase production capacity.