By Dudley Jackson (auth.)
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Additional resources for Introduction to Economics: Theory and Data
We do know pretty accurately what was spent on factories and machines for a number of years, and knowledge of these annual flows enables us, after a lapse of years, to calculate the capital stock. For example, suppose we know that in 1970 there was an investment expenditure of£ 1,000 on a Mini and that in 197 5 there was another flow of investment of £1,000 on another Mini. (If the price had risen, we should have to correct for inflation, so as to make sure that we are adding items valued at a common price; if the price of Minis had doubled between 1970 and 1975, we should either halve the 1_975 price- taking it all back to 1970 prices- or double the 1970 price- taking all to 1975 prices.
These constituted 29 per cent of the total stock of circulating capital. Next in sequence is the stock of work in progress: that is, the value of goods on the assembly line going through the factory at 31 December 1980. This Capital Fourth, the central government itself owns fixed capital, mostly in the form of buildings and works. The sector of the central government is quite widely defined and includes, besides all government -departments, all those organisations which have to submit each year to Parliament, or to a Minister of the Crown, statements of expenditures and revenues.
In a very general and abstract way, economic activity consists of transactions - dealings or pieces of business - among transactors. 7 economy by that bank account. The number of transactors in an economy is exceedingly numerous and it is therefore necessary to group them together into distinct sectors. A sector of the economy is a grouping of transactors. Three basic sectors, or groups of transactors, are normally distinguished, according to their economic characteristics. Among each of these groupings, subdivisions may be made, often according to the legal status of the transactor.