What is capital formation.
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capital formation refers to the increase in the stock of real capital in an economy during an accounting period.A country use capital stock together with labor to produce goods.
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Explanation:
Capital formation is a term used in a country's accounting period to describe net capital accumulation. The term refers to capital goods additions such as vehicles, machinery, transport property, and electricity. Capital formation is important as it enables large-scale production and more specialization.
The two main sources of capital formation are the domestic and external sources, including the voluntary and involuntary savings, government borrowings, idle resource mobilization, and deficit financing.
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