2. Accumulation of capital(machines, tools etc.) adds to the
capital stock of the economy and thereby raises its
productive capacity. The proportion (or %) of domestic
product that takes on the form of capital-goods is the
rate of capital formation. This capital helps in producing
economy’s output. It is also called investment.
Concept of GDCF and NDCF.
3. CAPITAL
FORMATION
Gross fixed capital
formation (GFCF)
Which does not change their form
in the process of production. Eg.
building, machineries etc
Inventories (change
in stock)
These are kept in stock to ensure
continuous production, sale and
transportation. Eg. raw materials,
finished goods etc
12. Is growth in economy possible without human
capital?
To quote Ranger Nurkse, “Economic development has much
to do with human endowments, social attitudes, political
conditions, and historical accidents. Capital is necessary but
not a sufficient condition of economic progress".
There are number of ways to increase human capital but
investment in human capital is mainly investment in two
areas:
A) Education B) Health
13.
14.
15. Increases output
Adds to the productive capacity
Tool of economic exchange
Improves quality of life
Rise in per capita income
Increases life expectancy
Higher educational attainment