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Business Environment by A. C. Fernando

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8

CAPITAL FORMATION, SAVINGS AND INVESTMENT

After reading this chapter, you will be able to understand and appreciate all that you need to know of savings, capital formation and investment and relate them to Indian economy. In this chapter, we study capital, savings and investment, how savings are the sources of capital formation, and why are they comparatively low in developing countries.

WHAT COMPRISES CAPITAL?

In ordinary language, capital is used in the sense of money. But in economics, we use the term capital in a variety of senses. Machines, tools and instruments, factories, canals, dams, trucks, raw materials, etc. would all constitute capital in economics. Capital is defined as “produced means of production” (Böhm-Bawerk). This definition ...

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