If there is an initial injection, multiplier action will start, which will cause output to increase and hence through the accelerator, the investment will increase and setoff another chain of multiplier reaction.
If, however, the full employment level is reached and output cannot increase any further, the investment does not take place and the ceiling is reached.
Indicators: indicator recovery boom Industrial production. Gradual increase high Commodity prices -do- -do- Cost of production Increases but slower than commodity prices Increase faster than recovery profits satisfactory high
Investment Replacement High Employment Gradual increase Rapid increase Bank loans Liberal High demand for advances Speculation Increases high Inventory stocks Fall Zero Business failures Rare Zero Business expectations Cautious but optimistic optimistic