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What is meant by Capital Formation? What is the difference between Gross Capital Formation and Net Capital Formation? |
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Answer» In economic term that part of income by which more production is possible than before, is called capital formation. In other words, an addition to capital stock is called capital formation. Gross capital formation: Gross capital formation signifies gross investment which includes within itself net investment and depreciation. Net capital formation. Net capital formation signifies nothing but net investment. Net capital formation = Gross capital formation – Depreciation As a matter of fact, capital formation means increase in net investment. |
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