The accelerator theory in a Keynesian framework

The Accelerator Theory is a simple theory of investment.  It argues that changes in demand influence decisions to invest.  The idea pre-dates Keynes and it is now relegated to a more minor role in understanding the factors affecting investment.  The critical conclusion of the accelerator theory is that it is the rate of growth in demand that is important not the absolute value if investment is to be stimulated.   Thus we understand the term “accelerator.” This paper puts the accelerator idea into a Keynesian framework using the C+I diagram, the S,I diagram and the IS,LM diagram.  By presenting the model differently than is currently done in textbooks, this procedure highlights its essentially overly optimistic nature and it leads to students more easily understanding the accelerator concept.