Gross capital formation may increase if 1 gross domestic savings increases 2 gross domestic co...........

Economic Affairs Growth and Indicators

Gross capital formation may increase if:

1. gross domestic savings increases

2. gross domestic consumption increases

3. GDP increases

Select the correct answer using the codes given below.

1 only

1 and 2 only

1 and 3 only

None of above

- Gross Capital Formation (GCF) reflects the net increase in an economy’s physical assets.

- Gross domestic savings increase: More savings can lead to more investments, boosting capital formation.

- Gross domestic consumption increase: This may boost GDP but not necessarily lead to capital formation.

- GDP increase: A rise in GDP might include increased capital formation, but not as directly as savings.

- Option 1: Only savings increase linked to capital formation.

- Option 2: Both savings and consumption, but consumption isn't a direct factor.

- Option 3: Savings and GDP, with savings being more direct.

Correct Answer: Option 1.

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