Accelerator theory - The principle states that a given change in demand for consumer goods will cause a greater percentage change in demand for capital goods. The principle is used to help explain business cycles. The accelerator theory suggests that the level of net investment will be determined by the rate of change of national income. If national income is growing at an increasing rate then net investment will also grow, but when the rate of growth slows net investment will fall. There will then be an interaction between the multiplier and the accelerator that may cause larger fluctuations in the trade cycle.
Aggregate demand is the total level of demand in the economy.
It is the total of all desired expenditure at any time by all groups in the economy. Aggregate supply - Aggregate supply is the total of all planned production at each level of prices. Aggregate supply is the total quantity supplied at every price level. It is the total of all goods and services produced in an economy in a given time period. There is some dispute between Keynesians and Monetarists about what determines the level of aggregate supply.