Capital Formation

A term used to describe net capital accumulation during an accounting period. Capital formation refers to net additions of capital stock such as equipment, buildings and other intermediate goods. A nation uses capital stock in combination with labour to provide services and produce goods; an increase in this capital stock is known as capital formation.

Generally, the higher the capital formation of an economy, the faster an economy can grow its aggregate income. Increasing an economy's capital stock also increases its capacity for production, which means an economy can produce more. Producing more goods and services can lead to an increase in national income levels.


Investment dictionary. . 2012.

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  • capital formation — expansion of capital or capital goods through savings, which leads to economic growth. Bloomberg Financial Dictionary * * * capital formation ˌcapital forˈmation noun [uncountable] ECONOMICS the process of collecting capital for use in investment …   Financial and business terms

  • capital formation — See fixed capital formation …   Big dictionary of business and management

  • capital formation — Econ addition to the stock of a country’s real capital by investment in fixed assets …   The ultimate business dictionary

  • capital formation — n. transfer of savings from private people and governments to the business sector for investment …   English contemporary dictionary

  • capital formation statement — itemization of changes in a business property …   English contemporary dictionary

  • Gross fixed capital formation — (GFCF) is a macroeconomic concept used in official national accounts since the 1930s. Concept and dataThe statistical aggregate of GFCF is a measure of the net new investment by enterprises in the domestic economy in fixed capital assets during… …   Wikipedia

  • fixed capital formation — An investment over a given period, as used in the national income accounts. It consists primarily of investment in manufacturing and housing. Gross fixed capital formation is the total amount of expenditure on investment, while net fixed capital… …   Big dictionary of business and management

  • gross domestic fixed capital formation — Econ investment in the fixed asset in an economy, including depreciation …   The ultimate business dictionary

  • formation — for‧ma‧tion [fɔːˈmeɪʆn ǁ fɔːr ] noun [uncountable] the forming of a company, organization, or committee: • The government backs the formation of a single environment agency covering Scotland as well as England and Wales. see also capital… …   Financial and business terms

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