Q.In an economy, national output rises by Rs. 100 crore in a given year. If the capital-output ratio (accelerator coefficient) is 3, calculate the induced investment triggered by this rise in output, according to the acceleration principle.

The super multiplier is the joint effect of the multiplier and the accelerator, giving a larger total change in income than either alone.

• Background: the multiplier shows how a change in investment causes a magnified change in income (through induced consumption). The accelerator shows how a change in consumption/income induces a further change in investment.
• Interaction: when the two work together, an initial rise in autonomous investment raises income (multiplier); the higher income induces more investment (accelerator); this induced investment again raises income through the multiplier, and so on. This continuous interaction is the super multiplier or leverage effect, a concept developed by J.R. Hicks. …

The multiplier measures the effect of a change in investment on income, while the accelerator measures the effect of a change in income/consumption on investment — they work in opposite directions.

• The multiplier explains how an initial injection of investment raises income by a multiple amount through successive rounds of spending.
• The accelerator explains how a rise in demand for consumer goods induces firms to invest more in capital goods, and the induced investment is a multiple of the change in demand. …