Question

Rules of govt. in improve capital formation

Answer 1

Explanation:

n this connection the distinction between potential economic surplus and actual economic surplus should be borne in mind. Potential economic surplus is the difference between the national income of a country and the essential or basic consumption (which includes also capital replacement), while the actual economic surplus is the surplus actually achieved after spending on essential and non-essential consumption and also unproductive investment.

Answer 2

In order to raise capital formation in the economy we have first to raise ratio of surplus to capital or rate of surplus to national income and then measures have to be adopted to mobilize this surplus for purposes of productive investment.