What is the difference between accelerator theory and multiplier theory in economics?

What is the difference between accelerator theory and multiplier theory in economics Introduction: Setting the Stage Hello, everyone! Welcome to our video on accelerator theory and multiplier theory in economics. Today, we'll embark on a journey to understand the intricacies of these theories and their relevance in the world of economics. So, let's dive in! Accelerator Theory: The Engine of Economic Growth Accelerator theory, as the name suggests, revolves around the concept of acceleration. It posits that changes in investment lead to magnified effects on the overall output of an economy. In simpler terms, an increase in investment doesn't just result in a linear growth in output; rather, it sets off a chain reaction, propelling the economy forward at an accelerated pace. This theory is particularly relevant in the context of capital-intensive industries, where a substantial investment can trigger a significant surge in production and employment. However, it's important to note that the accelerator theory also works in reverse. A decline in investment can have a compounding negative impact, potentially leading to an economic downturn. Multiplier Theory: The Ripple Effect While accelerator theory focuses on the initial investment, multiplier theory takes a broader perspective, considering the subsequent ripple effects. According to this theory, an injection of investment doesn't just boost the immediate output; it sets in motion a series of additional expenditures, creating a multiplier effect.