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The accelerator principle is a concept used to describe the positive economic impact of an increase in capital expenditures by businesses. As funds are spent to build plant and equipment there is a concurrent increase in the need for labor and material which results in increased employment and increased income. The increase in income results in more demand for goods and services as the money is spent which can in turn lead to further expansion of plant and equipment by businesses thus creating a virtuous self perpetuating cycle of economic growth.

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Q: What is the acceleration principle regarding investments?
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