Many people wonder why you need to study economics. But every business is built on the basis of this subject, and it is important to know some definitions and rules that you may encounter when conducting your business. In addition, the entire economic system of the country is built on the concepts of this science. In the article we will analyze and find out what gross capital accumulation is and what functions it performs.
Definition
We all know from childhood that in order to accumulate a certain amount for the desired acquisition, firstly, it is necessary to save, and secondly, save money. A kind of accumulation process is going on, which will later be beneficial for acquiring something. The same system works both in business and in the state.
Gross accumulation is the purchase of products, services, or some values (stocks) that further increase fixed capital. In other words, a legal entity or an individual (resident) makes some profitable purchase, which is not consumed, but gradually accumulates and leads to an increase in profit.
What is it like?
Gross capital formation is the purchase of assets that are not denominated in cash.
There are only two types of accumulation:
- Real - this is the acquisition of any property: offices, buildings, structures, technical equipment and so on.
- Non-material means securities, documents, purchase of ideas, innovation, works of art or literature, scientific works and the like.
What includes
There are several elements that are necessarily included in the gross accumulation process:
- The first component is the purchase of innovative technologies and ideas or the development of already acquired at the moment.
- Costs that increase productivity efficiency.
- Expenses related to the transfer of property rights for the acquisition of non-material assets (for example, taxation).
Accumulation and gross domestic product
Gross capital formation is a complex system of savings. It consists of several main parts, which we will talk about now. In addition, the gross accumulation of GDP shows the market price of products and services.
Consists of several elements:
- Accumulation and saving of the main profit.
- Conversion of reserves of tangible working capital.
- Purchase of significant acquisitions (originals of literary works, jewelry, and so on).
Features of capital formation in the Russian Federation
With the help of an example, we will try to understand the main specifics of the national income, as well as its characteristics and features. We analyze the gross accumulation of Russia.
Take the last decade, from 2007 to 2017. It can be analyzed that capital formation in the Russian Federation grew presumably by 0.7 percent. This is important for the state, since in general the level of economic development has increased. The highest rate was recorded in 2008, which was 22 percent, and the lowest in 2015 - 19 percent.
In general, if we compare the accumulation of fixed capital now and in the early 2000s, we can observe a huge leap. In 2001, it is two times lower than in our time. According to statistics, in 2012, the Russian Federation took seventh place in the national capital formation of fixed assets around the world, which at that time amounted to a huge amount - almost 14 billion national currency (rubles).
As for foreign investment, there is also an economic breakthrough. From 2007 to 2009, it was 16 percent, which is much more than in other countries at that time. Now the national accumulation in the country is quite stable and stable. In general, gross capital formation is the investment of funds in fixed assets in order to generate new profit in the future.
The diagram below is shown. It shows how the volume of gross savings in Russia changes over time.
Rules for increasing the indicator
Of course, the final consumption of gross capital formation occupies a significant part in the state economy, since it is important to correctly distribute and invest money in the spheres of life necessary for development, for example, production. However, increasing income levels is equally significant. But how to achieve it? There are some rules, following which the state can contribute to an early increase in capital:
- Control and coordination of external debts, which will be focused on a significant reduction in maintenance costs.
- The need for planning and implementing criteria and methods that would reduce the export of capital and contribute to attracting foreign investment.
- Ban on the growth of gold and foreign exchange resources.
All this will help to increase the level of gross accumulation of fixed assets of the country. However, often the value is determined by other factors, such as:
- Gross Domestic Product Index.
- All profits of the state, which is aimed at spending and maintaining the stability of the economy.
- The ability to use resources to form the accumulation of state capital.
