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What is the purpose of mobilizing savings in the process of capital formation?
  • a)
    To increase the consumption level
  • b)
    To transfer surplus agricultural workers to the non-agricultural sector
  • c)
    To encourage deficit financing
  • d)
    To provide resources for investment by entrepreneurs
Correct answer is option 'D'. Can you explain this answer?
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What is the purpose of mobilizing savings in the process of capital fo...
Purpose of Mobilizing Savings in Capital Formation
Mobilizing savings is a crucial aspect of capital formation, which refers to the process of generating and accumulating capital, particularly for investment purposes. Here's why the correct answer is option 'D':
Resource Provision for Entrepreneurs
- Mobilizing savings effectively channels funds from individuals and institutions into productive investments.
- Savings become the foundational resources that entrepreneurs can access to start or expand their businesses.
- This process enhances the overall investment climate, fostering business growth and innovation.
Investment and Economic Growth
- When savings are mobilized, they provide the necessary capital that entrepreneurs require for purchasing assets, hiring staff, and developing new products.
- Increased investment leads to higher productivity, which is essential for economic growth.
- As businesses grow, they create jobs, increase wages, and contribute to overall economic prosperity.
Financial Intermediation
- Financial institutions play a key role in mobilizing savings. They collect deposits and direct them toward productive investments.
- This intermediation ensures that savings are not merely stagnant but are instead used to fuel economic activities.
Long-term Economic Development
- Mobilizing savings helps in creating a sustainable cycle of investment and consumption.
- As entrepreneurs invest and grow, they contribute to the economy, which in turn encourages more savings and investments.
In summary, mobilizing savings is essential for providing resources for investment by entrepreneurs, driving economic development and ensuring a prosperous future.
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Community Answer
What is the purpose of mobilizing savings in the process of capital fo...
Mobilizing savings involves making the saved resources available for investment by entrepreneurs. This step ensures that the resources saved by households are used to create capital goods and contribute to economic growth and development.
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What is the purpose of mobilizing savings in the process of capital formation?a)To increase the consumption levelb)To transfer surplus agricultural workers to the non-agricultural sectorc)To encourage deficit financingd)To provide resources for investment by entrepreneursCorrect answer is option 'D'. Can you explain this answer?
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