Capital spending is investment spending on increasing your fixed assets, for example, building a hospital, buying equipment or building a new road. See also: Gross fixed capital formation Current spending is expenditure on day to day running costs, for example, government spending on wages of public sector workers or buying raw materials. One major difference …
Definition of crowding out – when government spending fails to increase overall aggregate demand because higher government spending causes an equivalent fall in private sector spending and investment. Question: Why does an increase in public sector spending by the government decrease the amount the private sector can spend? If government spending increases, it can finance …
Readers Question: Surely when we have near full employment as we have now the Government should be producing a surplus (as in the late 1990s) and reducing the national debt. Not to do so means that we have a structural problem in the UK? Not necessarily. A structural deficit problem implies that even allowing for …
The Lib Dems have proposed a budget rule that would run a persistent current budget surplus of 1%. This means that current spending (day to day costs of government) should always be less than tax revenue. Borrowing would only be allowed to finance capital investment after an independent watchdog found that the return would be …
From 2010 to 2019, total gross government debt (1) increased by £643 bn from £1.2 trillion to £1.8 trillion. UK Public sector debt 2010 – £1,194.3bn 2019 – £1,838.2bn A more helpful statistic is to consider debt as a percentage of GDP In 2010 Q2, public sector debt was 64.7% of GDP In 2019 Q3 …
Readers Question: What is the role and function of price in the economy? The price of goods plays a crucial role in determining an efficient distribution of resources in a market system. Price acts as a signal for shortages and surpluses which help firms and consumers respond to changing market conditions. If a good is …
In 2008, Zimbabwe had the second highest incidence of hyperinflation on record. The estimated inflation rate for Nov 2008 was 79,600,000,000% That is effectively a daily inflation rate of 98.0. Roughly every day, prices would double. It was also a time of real hardship and poverty, with an unemployment rate of close to 80% and a …
Barriers to entry are factors that make it difficult for new firms to enter the market. Barriers to entry will make a market less competitive. If barriers to entry are very high then the market will invariably become a monopoly. Examples of barriers to entry Tap water – Economies of Scale. This means as firms …