Capacity Utilization
Capacity Utilization measures the rate at which a firm makes use of their capital productive capacities, such as factories and machinery. Capacity Utilization generally rises when the economy is healthy and falls when demand softens. As such, it is useful as an economic trend indicator, reflecting overall growth and demand. High rates of Capacity Utilization generally exert inflationary pressures owing to scarce resources facing high levels of demand. However, it may also lead to new capital investments (i.e. new factories or plants) which promote future growth.
See Also
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