Definition: Gross fixed capital formation is essentially net investment. It is a component of the Expenditure method of calculating GDP. To be more precise Gross fixed capital formation measures the net increase in fixed capital. Gross fixed capital formation includes spending on land improvements, (fences, ditches, drains, and so on) plant, machinery, and equipment purchases; …
Definition of capital mobility – easy for physical assets and finance to move across geographical boundaries. Capital immobility – when capital faces restrictions on the free movement. What is capital? Capital principally refers to physical capital – durable goods used in the production process – machines, factories. This physical capital is determined by levels of …
Demand for labour is a derived demand. This means it depends on demand for the product the worker is producing. If there is an increase in demand for visiting coffee shops, it will lead to an increase in demand for baristas (people who make coffee) The demand for labour will also depend on labour productivity, …
Austerity can mean different things. See: definition of austerity. But, for this article, I will take austerity to mean a squeeze on public sector spending. In real terms (adjusted for inflation), government spending is rising. However, despite an overall rise in government spending, some departments have seen spending fall or at least shrink as a …
Definition A positive feedback loop is a situation where two events are mutually reinforcing. With this situation, a small change in one input can cause a bigger final increase in both the initial input and the secondary effect. Suppose, there is a rise in demand for buying a commodity. This rise in demand leads to …
Readers question: Firstly, I wholeheartedly praise the magnificent work done by you in exhibiting economic knowledge and demystifying it to us, the mediocre audience. I seriously question one fact that you presented about capitalism and how it “inevitably causes monopoly”. I grew really surprised and perplexed the moment I read that in “The problems of …
In 2007, EU economies, on the surface, seemed to be doing relatively well – with positive economic growth and low inflation. Public debt was often high, but (apart from Greece) it appeared to be manageable assuming a positive trend in economic growth. However, the global credit crunch (see: Credit crunch explained) changed many things. Impact …
Readers Question. Just saw a video called ‘How to waste £375 billion? (The Failure of Quantitative Easing)’ by Positive Money. I’ve recently started reading your blog and find your posts very informative. I wonder what you make of the ideas in this video and of this group in particular? (I haven’t seen the video. For …