In economics, expansion is an upward trend in the business cycle that is defined by a gain in output and employment, which in turn leads to an increase in household and business incomes and spending.
How can tangible capital support economic expansion?
- Monetary considerations : Long-term growth in the physical capital stock boosts the economy's total productive capacity by enabling the production of more goods and services with the same amount of labor and other resources.
- Investment increases the capital stock, and the amount of capital that is accessible to an economy is a key factor in determining its productivity. Investment supports economic expansion in this way.
- Roads, bridges, water supply, sewage, seaports, airports, schools, hospitals, electricity-generating plants (such as hydroelectric dams or windmills), telecommunications infrastructure, and military equipment are all tangible assets that the government can actively invest in.
- If the gross investment is greater than the capital depreciation, or if the net investment is positive, physical capital will steadily expand. This suggests that nations with high investment spending rates ought to experience high physical stock and rapid GDP development.
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