ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Capital accumulation primarily focuses on the growth of existing wealth through the investment of earned profits and savings. This investment is focused in a variety of ways throughout the economy. One method of growing capital is through the purchase of tangible goods that drive production.

Detailed explanation-2: -Capital accumulation contributes to economic growth by making each labor more productive. With capital accumulation, the stock of physical capital increases over time.

Detailed explanation-3: -In economics, capital refers to the assets-physical tools, plants, and equipment-that allow for increased work productivity. By increasing productivity through improved capital equipment, more goods can be produced and the standard of living can rise.

Detailed explanation-4: -Why is capital formation important? Capital formation essentially leads to more money swirling around the economy. The accumulation of capital goods translates to investment and the production of more goods and services, which should boost the income of the population and stimulate demand.