In income determination theory, acceleration principles shows that

Step 1: Analyze the question The question asks what the acceleration principle says about the relationship between income and investment.

Step 2: The concept The acceleration principle says that investment is induced by changes in income (or output). When national income or consumer demand rises, firms need more capital goods (machines, factories) to produce more output, so investment increases, often by a larger proportion than the rise in income.

• Formula: I = v × ΔY, where v is the accelerator coefficient (capital-output ratio) and ΔY is the change in income/output.
• Income (output) is the cause, and investment is the effect.

This contrasts with the multiplier, where an initial investment causes a larger change in income (investment is the cause and income is the effect).

Step 3: Evaluate the options

• A. Income is the cause, investment is the effect. This matches the acceleration principle. (The wording "investment investment" is a typo.)
• B. Both are causes. Incorrect.
• C. Both are effects. Incorrect.
• D. Poorly worded. It says income has "an effect on investment", which is loosely similar to A, but it is not the clear, complete statement of cause and effect that A gives.
• E. Investment is the cause, income is the effect. This describes the multiplier, not the accelerator.

Step 4: Answer The correct option is A.

Tip: Remember the pair:

• Multiplier: Investment → Income (investment causes income to change)
• Accelerator: Income → Investment (income causes investment to change)

"Accelerator: Income Arrives first, then Investment follows."