Question

Which of the following are true or false?

a) Capital formation means the increase in the stock of real capital in a country
b) Saving is not essential for capital formation

• A. Both (a) and (b) are true
• B. (a) is true, but (b) is false
• C. (a) is false, but (b) is true
• D. Both (a) and (b) are false

Answer 1

The correct option is B (a) is true, but (b) is false

1)Capital formation refers to the net capital accumulation during an accounting period for a particular area.Thus 1st statement is true.

2)Savings is essential for capital formation as savings leads to investment in an economy which in turn leads to more capital formation.