Melkamu for The reality

14/06/2024

07/02/2022

Amazing

13/08/2020

Grand Ethiopian Renaissance Dam፨
General overview
፨ Country ፦Ethiopia
፨ Location ፦ Benishangul-Gumuz Region
፨ Coordinates ፦ 11°12′55″N 35°05′35″E
፨ Construction began ፦ April 2011
፨ Opening date ፦2020–2022
፨ Construction cost ፦ $4.8 billion USD
፨ Owner(s) ፦ Ethiopian Electric Power
[Dam and spillways]
፨ Type of dam Gravity, ፦roller-compacted concrete
፨ Impounds፦ Blue Nile River
፨ Height ፦155 m (509 ft)
፨ Length ፦1,780 m (5,840 ft)
፨ Elevation at crest ፦655 m (2,149 ft)
፨ Dam volume ፦10,200,000 m 3 (13,300,000 cu yd)
፨ Spillways፦ 1 gated, 2 ungated
፨ Spillway type ፦6 sector gates for the gated spillway
፨ Spillway capacity ፦14,700 m 3 /s (520,000 cu ft/s) for the
gated spillway
፨ Reservoir፦ Creates Millennium Reservoir
፨ Total capacity ፦74 ×10 9 m 3 (60,000,000 acre⋅ft)
፨ Active capacity ፦59.2 ×10 9 m 3 (48,000,000 acre⋅ft)
፨ Inactive capacity ፦14.8 ×10 9 m 3 (12,000,000 acre⋅ft)
፨ Catchment area ፦172,250 km 2 (66,510 sq mi)
፨ Surface area ፦1,874 km 2 (724 sq mi)
፨ Maximum length ፦ 246 km (153 mi)
፨ Maximum water depth 140 m (460 ft)
፨ Normal elevation ፦640 m (2,100 ft)
[Power Station]
፨ Commission date ፦ 2020-2022
፨ Type፦ Conventional
፨ Turbines ፦14 x 400 MW
2 x 375 MW Francis turbines
፨ Installed capacity ፦6.45 GW (max. planned)
፨ Capacity factor ፦ 28.6%
፨ Annual generation ፦16,153 GWh (est., planned)
source፦ wikipedia

27/05/2020

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17/05/2020

Cobb-Douglas Production Function and Its properties
While discussing the production theory of the firm, economists C. W. Cobb and P. H. Douglas used a special form of production function, which is known as the Cobb-Douglas Production Function. Cobb-Douglas (C-D) production function is of the form
Q = ALαKβ (8.100)
where L = quantity used of labour
K = quantity used of capital
Q = quantity of output produced
A, α, β = positive constants.
Actually, the parameter A is the efficiency parameter. It serves as an indicator of the state of technology. The higher the value of A, the higher would be the level of output that can be produced by any particular combination of the inputs.
Also α and β are the distribution parameters. They have to do with the relative factor shares in the product. Here it is assumed that the firm uses two inputs, labour (L) and capital (K) and produces only one product (Q).
Properties of the Cobb-Douglas Production Function:
The C-D production functions possess a number of important properties which have made it widely useful in the analysis of economic theories. We shall now discuss them.
C-D production function (8.100) is a homogeneous function, the degree of homogeneity of the function being α + β. For here we obtain
A (tL)α (tK)β = tα + β A LαKβ = ta +β Q (8.100a)
where t is a positive real number.
We obtain from (8.100a) that if L and K are increased by the factor t, Q would increase by the factor tα +β. Also (8.100a) gives us that the condition for the C-D function (8.100) to become homogeneous of degree one (or linearly homogeneous) is
α + β = 1. (8.101)
In that case, (8.100) would give us that if L and K are increased by the factor t, then Q would also increase by the factor t. If the C-D production function is homogeneous of any degree α + β as in (8.100) and (8.100a), then (8.100) may be called the generalized version of the C-D function.
On the other hand, if the C-D function is homogeneous of degree one as given by (8.100) and (8.101), then the function is called a linearly homogeneous C-D function.
Properties of Cobb-Douglas Production Function, Homogeneous of Degree One:
The C-D production function of degree one may be written
Q=ALαKβ.α + β= 1 (8.102)
The properties of this function, i.e., (8,102), are
ADVERTISEMENTS:
(i) Average and marginal products of L and K, i.e., APL, APK, MPL, and MPK would all be the functions of L-K or K-L ratio. Let us now establish this property.
We are given:
Q = ALα K1, 0 < α < 1 (... α, β > 0 and α + β =1) (8.103)
⇒Q/L = ALα-1K1-α
ADVERTISEMENTS:
⇒Q/L = A (K/L)1-α
⇒APL = g (K/L) [... By definition, Q/L = APL] (8.104)
i.e., APL is a function of K-L ratio.
Similarly, from (8.103), we have:
ADVERTISEMENTS:
Q/K = ALαK−α
⇒ Q/K = A (L/K)α
⇒ APK = h (L/K) [... Q/K = APK] (8.105)
i.e., APK is a function of K-L ratio.
Again, from (8.103), we have
∂Q/∂L = αA.Lα−1. K1-α
= αA (K/L)1−α
⇒ MPL = ϕ (K/L) [...∂Q/∂L = MPL] (8.106)
i.e., MPL is a function of K-L ratio.
Lastly, from (8.103), we have
∂Q/∂K = (1−α) ALαK−α
= (1-α) A(L/K)α
⇒ MPK = Ψ (L/K) [...∂Q/∂K = MPK] (8.107)
i.e., MPK is a function of L-K ratio.
We have seen above that APL, APK, MPL and MPK are all functions of the K-L ratio. Therefore, if the firm changes the quantities of L and K keeping their ratio unchanged, all these average and marginal products would remain constant. In other words, they can change only when firm changes L and K in different proportions.
(ii) Since in the case of C-D production function (8.103), we have obtained both MPL and MPK to be functions of L-K ratio, this function have the following property also:
MRTSL.K = MPL/MPK = function of L/K ratio. (8.108) would
As we know, MRTSL,K is the marginal rate of technical substitution of L for K.
(iii) In the case of C-D production function (8.103), the APL and MPL curves and the APK and MPK curves, all would be downward sloping. That is, if the firm increases the use of one of the inputs, that of the other remaining unchanged, then the AP and the MP of the former input would decrease. Let us establish this property.
From eqns. (8.104) and (8.106), we obtain:
MPL = αA (K/L)1−α = αAPL
⇒ MPL < APL (... 0 < α < 1) (8.109)
Again, from (8.106) we obtain
∂/∂L (MPL) = αAK1−α (α−1) Lα−2
= α (α−1) AK1-αL α−2 < 0 (8.110)
[... 0 < α 0].
This straight line starts from the origin because when L = 0 in (8.118), we have K = 0. Therefore, for the C-D homogeneous function of degree one (8.103), the expansion path of the firm would start from the point of origin and it would be a straight line sloping upwards towards right.
In the above analysis if we use eqn. (8.100) in place of eqn. (8.103), we would obtain that for C-D production function, homogeneous of any degree, the expansion path would start from the origin and it would be a straight line sloping upward towards right, i.e., this property also holds for the general version of the C-D function, homogeneous of any degree, α + β.
(vii) For C-D production function (8.103), total output would be exhausted if the inputs L and K are paid at the rate of their respective marginal product, i.e., L. MPL + K. MPK = Q.
We may prove this in the following way.
LMPL + KMPK
= LAαLα−1K1−α + KALα (1−α) K−α
= αALαK1−α + (1−α) ALαK1−α
= ALαK1−α (α + 1 −α)
= ALαK1−α
=Q (8.119)
Hence, the property is established. This property may also be established by using the general version of the C-D function (8.100), i.e., this property holds, for C-D function homogeneous of any degree.
(viii) For C-D production function (8.103), if labour (L) and capital (K) are paid at the rate of their respective MPs, then the relative shares of labour and capital would be a and 1 – a respectively. We may prove this in the following way.

16/05/2020

( INFLATION CHAPTER )

INFLATION
● Inflation is a sustained and considerable increase in prices of goods and services in a country, which results in a decrease of the buying power of money.

● Inflation is a general increase in prices and fall in the purchasing value of money.

● In economics , inflation is a sustained increase in the general price level of goods and services in an economy over a period of time.

● Inflation is a quantitative measure of the rate at which the average price level of a basket of selected goods and services in an economy increases over a period of time.

● Inflation is the increase in the prices of goods and services over time.

● It refers to the measure or rate by which the cost of goods and services rises and
purchasing power declines. As prices increase, monetary value decreases—prompting consumers to spend less on goods and services.

MEASURING INFLATION
price indexes are used to measure inflation. Prices changes in the general price level are measured by means of price indexes. There are three used to calculate the inflation rate :

● CPI ( Consumer Price Index )
- This is an index based on the prices of goods that influence the cost of living.
- The index is based on a basket of goods and services purchased by the average consumer.
- It is used to calculate consumer inflation.

● PPI ( Producer Price Index )
- It is an index that reflects the cost of production ( rather than the cost of living )
- It is used to calculate producer inflation.
- It focuses on the prices of manufactured goods when leaving factory and the prices of imported goods when entering the borders of a country.

● The Implicit GDP deflator
( An all-inclusive inflation rate measure )
- This is an index where complicated techniques are used to calculate it as a third index that actually measures GDP at constant prices, but can also be used as an all inclusive measure of inflation.

TYPES & CHARACTERISTICS OF INFLATION
There are two main types of inflation that is Demand-Pull Inflation and Cost-Push Inflation. I have explained their characteristics below :

CONSUMER INFLATION
- This is an inflation calculated using the CPI ( Consumer Inflation ). The following indicators are used to describe consumer inflation, infact they form the characteristics of it :
● Headline CPI - which refers to the unadjusted CPI, presenting the cost of the shopping basket of goods and services of a typical or average SA household.
● Core Inflation - Which excludes items from the CPI basket that have highly volatile prices and items that are affected by government intervention and policy. e.g food prices, energy prices , Interest rates on bonds, Vat assessment rates etc.
● CPIX Inflation - Which excludes the effects of mortgage bond ( housing loan ) interest cost from the headline CPI.
● API ( Administered Prices Inflation ) - Which refers to prices of goods and services that are set by government or controlled by government-appointed authorities.

PRODUCER INFLATION
- This is the inflation which is calculated using PPI ( Producer Price Index.
- When the rand depreciates it will first be reflected in the PPI.

THE DIFFERENCE BETWEEN CPI & PPI

CPI :
● Pertains cost of living.
● Basket consists of consumer goods and services.
● Capital and intermediate goods are excluded.
● Prices Include Vat
● Interest rates are taken into account.
● Prices of imported goods are not shown.

PPI :
● Pertains to cost of production.
● Basket consists of goods only.
● Capital and intermediate goods are included.
● Prices exclude VAT.
● Interest rates are excluded
● Prices of Imported goods are shown explicitly.

ADDITIONAL INFLATION TYPES
The following are the other inflation types which fall under the Cost-Push Inflation and Demand-Pull Inflation as the two main inflation categories :

●Demand-pull Inflation
- Occurs when the total demand for goods and services increases faster than supply.

●Cost-Push Inflation
- Occurs when prices increase due to production costs.

●Normal Inflation
- A low or moderate inflation level that is considered normal.
It is experienced by the developed countries mostly.

●Creeping Inflation
- Occurs when wages don't keep up with inflation.

●Hyper- Inflation
• Very high rate of inflation (more than 50%).
• Price levels rise so rapidly that people lose confidence in the value of money.
• Becomes difficult for the economy to operate.
• People resort to goods as medium of exchange – barter.
- This inflation type occured in Germany in 1923 after the government printed new bank notes to pay for reparations of about $33 billion after the war. The notes were not backed up by bullion or matched by production, thus the money lost value. Prices spiralled and people lost all their savings.

● Stagflation
- Occurs when both unemployment and inflation levels are high simultenoussly.

●Deflation
- Occurs when general price levels show persistent decrease.

●Disinflation
- When prices increase at a more moderate rate.

COMPARISON OF INFLATION RATES
●Annual inflation rates of CPI, PPI and GDP deflation are provided.
●For policy purposes and forecasting all these indexes as well as other implicit deflators are considered.
●For the consumer the CPI is by far the most important indicator because it relates to their cost of living and the interest rate policy of the Reserve Bank.

THE CHARACTERISTICS & CAUSES OF DEMAND-PULL & COST-PUSH INFLATION.

DEMAND-PULL INFLATION
Demand-pull inflation occurs when aggregate demand in an economy outpaces (is faster than) aggregate supply, even though gross domestic product rises and unemployment falls. Effectively, too much money is spent chasing too few goods. Generally, an increase in the supply of demanded goods will reverse the inflationary trend.

DEMAND-PULL CHARACTERISTICS
The demand-pull inflatio has the following characteristics :
• Aggregate demand rises more than aggregate supply, causing an increase in the general price level.
• Groups that are responsible: Consumers, businesses and government.
• Foreigners’ contribution : They further increase the demand for our goods and services through an increase in exports.
• Relative increase in aggregate demand’s components :
C (consumption spending), I (investment spending), G (government spending), M (cost of imports).
• Decline savings: if savings habits are changed and consumers start spending their current and accumulated savings, growth in aggregate demand can outstrip growth in aggregate supply.
• Tax reduction : If personal income tax is reduced more money is available for private consumption expenditure.
• Access to credit : Ggreater availability of consumer credit (credit cards) and cheaper credit – credit multiplier kicks in and more credit is created.

DEMAND-PULL CAUSES
Demand-pull inflation is caused by the following factors :
• Increase in household consumption : due to easily available credit, a reduction in taxes and less savings.
• Investors expenditure : may lead to higher profit expectations of businesses. They will invest more, this might lead to an increase in the demand for goods and services.
• Government expenditure : an increase in government spending leads to an increase in prices. More money comes into circulation due to an increase in spending on infrastructure, consumption spending and social spending.
• Export earnings : the growth in foreign countries might create an increased demand for locally produced goods without an increase in production.

COST-PUSH INFLATION
Cost-push inflation is caused by an increase in the cost of goods or services that are very important to the economy, and for which no alternatives exist. Examples can be spikes in the oil price due to war, huge price rises in essential food products due to drought, or excessive increases in the cost of labour due to control of industries by trade unions.

COST-PUSH CHARACTERISTICS
The cost-push inflation has the following characteristics :
• An increase in labour costs : Aggressive trade union negotiations push the price of labour up above the increase in productivity.
• Producers increase profits: Prices rise more than the rise in production costs.
• The state imposes a higher VAT rate.
• Expensive imported products (intermediate goods) cause an increase in the prices of locally finished goods.
• Lower productivity but the same remuneration: The cost of production increases.
• Natural disasters: Floods or droughts increase the cost of production.
• Increased total costs on the supply side.

COST-PUSH CAUSES
The cost-push inflation is caused by the following factors :
• Expensive imported products (intermediate goods) cause an increase in the prices of locally finished goods.
• Lower productivity but the same remuneration : The cost of production increases.
• Natural disasters : Floods or droughts increase the cost of production.
• Increased total costs on the supply side.
• Wages : an increase in wages constitutes 50% of GVA at basic prices and is one of the major causes of cost-push inflation.
• Key inputs : When the prices of key input goods that are imported, increase, domestic cost of production increases especially in the manufacturing sector.
• Exchange rate depreciation : The depreciation in the rand will lead to more expensive imports.
• Profit margins : When businesses increase their profit margins, their cost of production and prices consumers must pay, will also increase.
• Productivity : Less productive factors of production will lead to increased cost per unit.
• Natural disasters : Prices will increase due to weather changes such as droughts, floods and global warming.

KEYNESIANS & MONETARISTS EXPLANATIONS ON INFLATIO
● The Monetarist Explanation : According to the monetarists sustained high rates of growth in the money supply cause high inflation, while low rates of growth cause low inflation. They base their view on the quantity theory of money (MV = PT). They make three basic assumptions: the velocity of circulation of money is stable; the quantity of money is exogenously determined by monetary authorities and real output is determined by the quantity and quality of various factors of production.
- The monetarists believe that inflation rate increase is triggered by an increase in money supply.

● The Keynesians Explanation :
- The keynesians believe that the increase in inflation rate is triggered by the excessive demand for goods and services.

EXPECTANCY OF INFLATION
The inflationary process is triggered by demand pull and cost push inflation. The role of inflationary expectations :
• during inflation consumers expect prices to rice and start to buy more goods
• labour unions wish to protect their members’ income against erosion of purchasing power caused by inflation
• expectation that wages will rise encourages some businesses to increase prices in advance.

EFFECTS/CONSEQUENCES OF INFLATION
Inflation has the following effects :
• Debtors/Creditors : debtors benefit because they receive money with a high purchasing power and repay their debt with money with low purchasing power. Creditors on the other hand suffer.
• Wage and salary earners : people with a fixed income will be able to purchase less as prices are rising.
• Investors and savers : Assets with a fixed nominal value have a fixed return and lower purchasing power as prices increase. Real value of savings decreases.
• Tax payers : In South Africa income is taxed on a progressive system. We experience a bracket creep, resulting from inflation and progressive income tax and the government benefits.
• Disruption of industrial peace : Wage bargaining is accompanied by strikes and mass action.

BRACKET CREEP CONCEPT
- Occurs when salary increases move people into higher tax brackets and they could be effectively worse off.

MEASURES TO COMBAT INFLATION
The policy makers can employ a numerous measures to fights inflation when it gets too high. I have highlighted three types of policy measures which are Fiscal, Monetary and Other Measures.

FISCAL MEASURES
Fiscal measures are measures taken by the Minister of Finance regarding taxation and expenditure. Examples of measures that can be taken include :
• An increase in direct taxation (personal income tax) which will help to decrease demand.
• An increase in indirect taxation (VAT) causes spending to decrease because goods become more expensive. • A loan levy. Reduces the disposable income of consumers.
• The state cuts back on expenditure by cancelling government projects like roads, hospitals and schools.
• The country’s finance budget deficit is non-inflationary (the government uses loans from the non-banking sector to limit inflation).
• The state imposes surcharges on imported goods. This increases the price of these imported goods, resulting in many people being unable to afford to buy these goods.

MONETARY MEASURES
The South African Reserve Bank (SARB) and the government apply certain monetary measures to curb inflation :
• The SARB adjusts the quantity of money to the needs of the economy, (e.g. through open-market policy, thus maintaining a fine balance) between the supply of goods and services and money supply.
• The SARB curbs inflation caused by excess demand by reducing the money supply.
• The bank rate of the central bank (SARB) affects the interest rates in the economy (repo rate). The bank rate can be raised to encourage savings.
• Excessive credit can be reduced by restricting the granting of credit by banks.
• The SARB can apply moral pressure (moral suasion) on financial institutions to be more careful when granting credit.

OTHER MEASURES
Additional measures that can be taken to combat inflation include :
• Increase productivity : This is a long-term measure generated through improved education and training which allows more people to be employed and ensures they are more productive.
• Price control : By fixing the price of certain essential goods, the government assures they remain affordable.
• Wage policy : The government takes a decision to break the inflationary spiral of increased wages and prices by keeping the increase in wages below or at the level of inflation.
• Stricter conditions for consumer credit : The government makes it harder for consumers to get credit in order to restrict their spending.
• Encourage personal savings : The government implements measures to encourage savings, e.g. by cutting taxes on savings. The imbalance between demand and supply is corrected by increased savings, as people save more and spend less.
• Import controls are relaxed.
• Floating exchange rate : Prices are automatically adjusted to international conditions.
• Indexation: A policy of linking prices of items such as wages, pensions and mortgage bond interest rates to price indices to eliminate the effects of inflation.

16/05/2020

? Meaning and Concept

Government has several policies to implement in the overall task of performing its functions to meet the objectives of social & economic growth. For implementing these policies, it has to spend huge amount of funds on defence, administration, and development, welfare projects & various other relief operations. It is therefore necessary to find out all possible sources of getting funds so that sufficient revenue can be generated to meet the mounting expenditure.
Planning process of assessing revenue & expenditure is termed as Budget.

The term budget is derived from the French word "Budgette" which means a "leather bag" or a "wallet". It is a statement of the financial plan of the government. It shows the income & expenditure of the government during a financial year, which runs generally from 1stApril to 31st
March.
Budget is most important information document of the government. One part of the government's budget is similar to company's annual report. This part presents the overall picture of the financial performance of the government. The second part of the budget presents government's financial plans for the period upto its next budget.

So, every citizen of a nation from the common man to the politician is eager to know about the budget as they would like to get an idea of the :-

1.Financial performance of the government over the past one year.

2.To know about the financial programmes & policies of the government for the next one year.

3.To know how their standard of living will be affected by the financial policies of the government in the next one year.

:-

According to Tayler, "Budget is a financial plan of government for a definite period".

According to Rene Stourm, "A budget is a document containing a preliminary approved plan of public revenues and expenditure".

:-

The main components or parts of government budget are explained below.

:-

This financial statement includes the revenue receipts of the government i.e. revenue collected by way of taxes & other receipts. It also contains the items of expenditure met from such revenue.

(a) Revenue Receipts ↓

These are the incomes which are received by the government from all sources in its ordinary course of governance. These receipts do not create a liability or lead to a reduction in assets.

Revenue receipts are further classified as tax revenue and non-tax revenue.

1.Tax Revenue :-

Tax revenue consists of the income received from different taxes and other duties levied by the government. It is a major source of public revenue. Every citizen, by law is bound to pay them and non-payment is punishable.

Taxes are of two types, viz., Direct Taxes and Indirect TaxesDirect taxes are those taxes which have to be paid by the person on whom they are levied. Its burden can not be shifted to some one else. E.g. Income tax, property tax, corporation tax, estate duty, etc. are direct taxes. There is no direct benefit to the tax payer.

Indirect taxes are those taxes which are levied on commodities and services and affect the income of a person through their consumption expenditure. Here the burden can be shifted to some other person. E.g. Custom duties, sales tax, services tax, excise duties, etc. are indirect taxes.

2.Non-Tax Revenue :-

Apart from taxes, governments also receive revenue from other non-tax sources.

The non-tax sources of public revenue are as follows :-

: The government provides variety of services for which fees have to be paid. E.g. fees paid for registration of property, births, deaths, etc.

: Fines and penalties are imposed by the government for not following (violating) the rules and regulations.

: Many enterprises are owned and managed by the government. The profits receives from them is an important source of non-tax revenue. For example in India, the Indian Railways, Oil and Natural Gas Commission, Air India, Indian Airlines, etc. are owned by the Government of India. The profit generated by them is a source of revenue to the government.

: Gifts and grants are received by the government when there are natural calamities like earthquake, floods, famines, etc. Citizens of the country, foreign governments and international organisations like the UNICEF, UNESCO, etc. donate during times of natural calamities.

: It is a type of levy imposed by the government on the people for getting some special benefit. For example, in a particular locality, if roads are improved, property prices will rise. The Property owners in that locality will benefit due to the appreciation in the value of property. Therefore the government imposes a levy on them which is known as special assessment duty.

3. India's Revenue Receipts :-

The tax revenue provides major share of revenue receipts to the central government of India. In 2006-07 tax revenue (direct + indirect taxes) of central government was Rs. 3,27,205 crores while non-tax revenue was Rs. 76,260 crores.

(b) Revenue Expenditure ↓

i. What is Revenue Expenditure ?

Revenue expenditure is the expenditure incurred for the routine, usual and normal day to day running of government departments and provision of various services to citizens. It includes both development and non-development expenditure of the Central government. Usually expenditures that do not result in the creations of assets are considered revenue expenditure.

ii. Expenses included in Revenue Expenditure :-

In general revenue expenditure includes following :-

1.Expenditure by the government on consumption of goods and services.
2.Expenditure on agricultural and industrial development, scientific research, education, health and social services.
3.Expenditure on defence and civil administration.
4.Expenditure on exports and external affairs.
5.Grants given to State governments even if some of them may be used for creation of assets.
6.Payment of interest on loans taken in the previous year.
7.Expenditure on subsidies.

iii. India's Defence Expenditure :-

In 2006-07, Defence expenditure of the central government of India was Rs. 51,542 crores.

2. Capital Budget

This part of the budget includes receipts & expenditure on capital account projected for the next financial year. Capital budget consists of capital receipts & Capital expenditure.

(a) Capital Receipts ↓

i. What are Capital Receipts ?

Receipts which create a liability or result in a reduction in assets are called capital receipts. They are obtained by the government by raising funds through borrowings, recovery of loans and disposing of assets.

ii. Items included in Capital Receipts :-

The main items of Capital receipts (income) are :-

1.Loans raised by the government from the public through the sale of bonds and securities. They are called market loans.
2.Borrowings by government from RBI and other financial institutions through the sale of Treasury bills.
3.Loans and aids received from foreign countries and other international Organisations like International Monetary Fund (IMF), World Bank, etc.
4.Receipts from small saving schemes like the National saving scheme, Provident fund, etc.
5.Recoveries of loans granted to state and union territory governments and other parties.

(b) Capital Expenditure ↓

i. What is Capital Expenditure ? :-

Any projected expenditure which is incurred for creating asset with a long life is capital expenditure. Thus, expenditure on land, machines, equipment, irrigation projects, oil exploration and expenditure by way of investment in long term physical or financial assets are capital expenditure.



Thus, we see that the budget mirrors projected receipts and expenditures.