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The Military spending space functions as a maximum spending limit. It prevents unrealistic spending on weapons and ammunition.
The spending space depends on the difference between income and cost in the country and it increases if the country has a larger positive balance. It also depends on the population of the country and higher population numbers result in a larger spending space.
There are minimum levels that will be around 50B per game month for countries with a low population number. These minimum levels will increase with the population. The max spending space per game month is 250B. If the military spending space remains unused, it may accumulate up to 700B in all countries. On the Fearless Blue world which is the war world, all these amounts are twice bigger.
Although military spending can be increased, the danger of overspending increases too. Counties can get into large debt and bankrupt.
When weapons or ammunition is ordered, the military spending space, declines by the value of that order. Contracts are treated as orders. If you sign many contracts for delivery of weapons and ammunition, you may exceed your spending space.
The best way of course to increase the spending space is to grow the economy, so that more money is available for weapons. Short-term shortages can be fixed quickly by the use of a military spending space booster that will add a onetime 500 B to the military spending space.