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- Title
Constructing an alternative indicator of aggregate demand.
- Abstract
In this article, the author discusses an alternative indicator of aggregate demand. There are a number of issues to deal with when constructing an aggregate demand indicator that captures the pressure on resources arising from government spending. The two components are measured in different units, so it would not be meaningful simply to add them together. One of the ways to convert them into the same units is to work out how many private sector goods the government's labor force could have produced, if they had instead worked in the private sector. This is done by multiplying the number of workers employed by the government by a measure of private sector labor productivity. This gives a measure of the opportunity cost of workers employed by the government, in terms of private output foregone.
- Subjects
UNITED Kingdom; SUPPLY &; demand; ECONOMIC structure; LABOR productivity; LABOR supply; PUBLIC spending; INDUSTRIAL productivity; LABOR economics; OPPORTUNITY costs
- Publication
Bank of England Quarterly Bulletin, 2005, Vol 45, Issue 2, p146
- ISSN
0005-5166
- Publication type
Article