Question

how does higher rate of net capital formation lead to higher level of productivity?​

Answer 1

Capital formation implies an increase in capital assets such as plant and machinery, buildings and equipment available to the firm. Now, with a higher net capital formation, means higher capital equipments per unit of labour. This leads to a higher productivity/efficiency of labour.

Answer 2

Capital formation implies an increase in capital assets such as plant and machinery, buildings and equipment available to the firm. Now, with a higher net capital formation, means higher capital equipments per unit of labour. This leads to a higher productivity/efficiency of labour.

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