Question

If there is an excess of production over consumption in a year, where does it go? Also mention two goods which help in capital formation in an economy

Answer 1

Answer:

Explanation:

there is a surplus in the market of the particular good and service

the goods are nut packing machines and juice filling machines

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Answer 2

Answer:

Capital formation is the increase in the stock of capital goods. E.g.machinery, equipment's, buildings, means of transport, factories, etc. which are used for further production.It is an net addition made by the stock of capital in an economy during a period of time.

Reasons responsible for low capital formation:

1) Low per capital income - Level of saving is low because of low level of income, which is the primary source of capital formation.

2) Inflation - Higher inflation means less excess of income for a long way investment, indicates a low rate of capital formation.

Remedies to overcome with low capital formation:

1) Impose high taxes on the rich.

2) Creating favourable business conditions in the economy.

3) In order to increase savings in the economy deposit scheme should bring into force compulsory.

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