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Stages of capital formation

Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 Uma asked almost 3 years ago

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Avatar 37a3bd7bc7328f0ead2c0f6f635dddf60615e676e6b4ddf964144012e529de45 narahari answered almost 3 years ago

1. Increase in Savings Capital formation depends on saving. According to J.M. Keynes “Saving is the excess of income over consumption expenditure”. To be more precise, saving is a part of income that is not spent on current consumption. If consumers spend their entire incomes on consumers’ goods, there could be no accumulation of capital goods. If, on the other hand, consumers decide to save part of their incomes, country’s resources can be devoted to making capital goods.

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