Question

Gross fixed capital formation is defined as____________.

• A. flow of expenditure devoted to increase or maintaining of the capital stock
• B. expenditure incurred on physical assets only
• C. expenditure incurred on liquid assets only
• D. net increase in physical assets

Answer 1

Answer: (D)

net increase in physical assets

1:Gross fixed capital formation (GFCF) refers to the net increase in physical assets (investment minus disposals) within the measurement period.
2:It does not account for the consumption (depreciation) of fixed capital, and also does not include land purchases. It is a component of expenditure approach to calculating GDP.