Question

Capital formation/investment is intended for_____.

• A. maintaining the existing standard of living for the additional population
• B. improving the existing standard of living for the entire population
• C. both (a) and (b)
• D. neither (a) nor (b)

Answer 1

Answer: (C)

both (a) and (b)

Capital formation means increasing the stock of real capital in a country.

In other words, capital formation involves making of more capital goods such as machines, tools, factories, transport equipment, materials, electricity, etc., which are all used for future production of goods.

Higher the capital formation more will be the growth of the economy.

Thus, higher capital formation helps to maintain the current standard of living as well helps to improve the standard of living of the people in the future.