Question

physical Capital formation​

Answer 1

Answer:

Physical capital accumulation was central, as codified by the Harrod–Domar dynamic equilibrium condition, which in the simplest case is that the rate of growth equals the average saving rate divided by the incremental capital output ratio (ICOR). This relation was used to calculate savings requirements to achieve growth targets given ICORs and to justify efforts to increase savings, including shifting resources from private entities to governments under the assumption that governmental savings rates exceeded private ones, and to obtain foreign savings to supplement domestic savings. When exchange rates became overvalued, foreign capital to purchase critical machinery and equipment became of particular concern, as systematized in the ‘two-gap’ model of Chenery and Bruno (1962) in which the constraint on growth is either savings or foreign exchange. Human capital accumulation was not central in most analysis partly because of the widespread perception of surplus labor.

Answer 2

Physical capital consists of tangible, man-made objects that a company buys or invests in and uses to produce goods. Physical capital items, such as manufacturing equipment, also fall into the category of fixed capital, meaning they are reusable, and not consumed during the production proces

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