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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
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B
(a) is true, but (b) is false
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C
(a) is false, but (b) is true
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D
Both (a) and (b) are false
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Solution

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.

Economics

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