Simple accelerator model 2

The simple accelerator model assumes that the desired
level of capital stock is a fixed ratio to output. But there
are reasons to expect this ratio is not constant but varies
depending upon the cost of capital to labour, interest
rates and tax rates etc.

The simple accelerator model assumes that firms can
instantaneously adjust their capital stock to the observes
level of demand. This is expecting too much.” Time to
build” can be significant.