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Gross domestic capital formation is defined as
- a)flow of expenditure devoted to increased or maintaining of the capital stock
- b)expenditure incurred on physical assets only
- c)production exceeding demand
- d)net addition to stock after depreciation
Correct answer is option 'D'. Can you explain this answer?
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Gross domestic capital formation is defined asa)flow of expenditure de...
Gross domestic capital formation (GDCF) is a term used in economics to measure the net addition to a country's stock of physical capital over a specific period. It refers to the total investment made in an economy during a given time period. The correct answer is option 'D', which states that GDCF is the net addition to the capital stock after accounting for depreciation.
Explanation:
1. Definition of Gross Domestic Capital Formation:
Gross Domestic Capital Formation (GDCF) is a measure of investment in an economy. It represents the total value of all investments made in physical assets such as machinery, buildings, infrastructure, and other productive assets during a specific time period. It is an important indicator of a country's economic growth and development.
2. Flow of Expenditure Devoted to Increased or Maintaining of the Capital Stock:
GDCF represents the flow of expenditure that is dedicated to either increasing or maintaining the capital stock of a country. This includes investments made by businesses, households, and the government in the form of fixed capital formation.
3. Expenditure Incurred on Physical Assets Only:
GDCF includes expenditure incurred on physical assets only. It does not include investments in financial assets such as stocks, bonds, or other securities. GDCF focuses on investments that contribute to the production capacity and infrastructure of an economy.
4. Production Exceeding Demand:
Production exceeding demand is not the correct definition of GDCF. While GDCF contributes to the production capacity of an economy, it does not solely refer to production exceeding demand. GDCF is a broader concept that encompasses all investment activities.
5. Net Addition to Stock After Depreciation:
The correct definition of GDCF is the net addition to the capital stock after accounting for depreciation. Depreciation refers to the wear and tear or obsolescence of existing capital assets. GDCF measures the net increase in the capital stock by subtracting depreciation from the total investment made.
In conclusion, gross domestic capital formation (GDCF) is the net addition to a country's stock of physical capital after accounting for depreciation. It represents the total investment made in physical assets during a specific time period. GDCF is an important indicator of economic growth and development.
Explanation:
1. Definition of Gross Domestic Capital Formation:
Gross Domestic Capital Formation (GDCF) is a measure of investment in an economy. It represents the total value of all investments made in physical assets such as machinery, buildings, infrastructure, and other productive assets during a specific time period. It is an important indicator of a country's economic growth and development.
2. Flow of Expenditure Devoted to Increased or Maintaining of the Capital Stock:
GDCF represents the flow of expenditure that is dedicated to either increasing or maintaining the capital stock of a country. This includes investments made by businesses, households, and the government in the form of fixed capital formation.
3. Expenditure Incurred on Physical Assets Only:
GDCF includes expenditure incurred on physical assets only. It does not include investments in financial assets such as stocks, bonds, or other securities. GDCF focuses on investments that contribute to the production capacity and infrastructure of an economy.
4. Production Exceeding Demand:
Production exceeding demand is not the correct definition of GDCF. While GDCF contributes to the production capacity of an economy, it does not solely refer to production exceeding demand. GDCF is a broader concept that encompasses all investment activities.
5. Net Addition to Stock After Depreciation:
The correct definition of GDCF is the net addition to the capital stock after accounting for depreciation. Depreciation refers to the wear and tear or obsolescence of existing capital assets. GDCF measures the net increase in the capital stock by subtracting depreciation from the total investment made.
In conclusion, gross domestic capital formation (GDCF) is the net addition to a country's stock of physical capital after accounting for depreciation. It represents the total investment made in physical assets during a specific time period. GDCF is an important indicator of economic growth and development.
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Gross domestic capital formation is defined asa)flow of expenditure devoted to increased or maintaining of the capital stockb)expenditure incurred on physical assets onlyc)production exceeding demandd)net addition to stock after depreciationCorrect answer is option 'D'. Can you explain this answer?
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