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Gross capital formation will increase if:
1. gross domestic savings increases
2. gross domestic consumption increases
3. GDP increases
Select the correct answer using the codes given below.
  • a)
    1 only
  • b)
    1 and 2 only
  • c)
    1 and 3 only
  • d)
    None
Correct answer is option 'D'. Can you explain this answer?
Verified Answer
Gross capital formation will increase if:1. gross domestic savings inc...
 Answer & Explanation
d) None. Gross capital formation, in simple terms is equivalent to investment made. It was earlier called gross domestic investment. The part of GDP that is used is called gross domestic consumption, while the part that is saved is gross domestic savings (GDS). Some part of this GDS will be re-invested back, and that is called gross capital formation. Now, an increase in GDP or GDS will not necessarily lead to an increase in capital formation. Because how much in invested back will depend on many other factors.
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Gross capital formation will increase if:1. gross domestic savings increases2. gross domestic consumption increases3. GDP increasesSelect the correct answer using the codes given below.a)1 onlyb)1 and 2 onlyc)1 and 3 onlyd)NoneCorrect answer is option 'D'. Can you explain this answer?
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