(a) The stock of capital goods is the stock of those goods which are used for more production (eg. machines, equipments, buildings, means of transport, factories etc.) whereas the capital formation is the increase or net addition in the stock of capital goods. 

(b) The two circumstances are: 

1. Status symbol goods with prestige value. More of these goods are demanded only when they are priced high. eg. diamonds, high priced shoes, jackets etc.

2. ‘Giffen goods’. Less of these is demanded at a lower price. Under these circumstances the demand curve slopes upwards to the right. 

(c) As a fiscal agent to the government, it advises the govt, in matters relating to the fiscal, monetary and banking policies such as deficit financing devaluation, trade policy, foreign exchange policy, reduction in public expenditures, increase in taxes, public borrowings, policy of surplus budget etc. 

(d) A mild inflation occurs when there is sustained rise in prices over time at a mild rate, say around 2% to 3% per year which helps in increasing the public revenue and thus helps the govt, to incur public expenditure for welfare of the people. Thus, it is beneficial for economic growth. 

(e) Taxes are used to interact in the market, so as to induce a greater output of goods and services, resulting in the higher growth of economy.