Question

The components of gross capital formation is/are _______.
1. Gross fixed capital formation
2. Changes in inventories 
3. Savings
4. Both 1 and 2.

Answer 1

Correct Answer - Option 4 : Both 1 and 2.

The correct answer is option (4) i.e. Both 1 and 2.

• Gross Capital Formation includes only produced capital goods (machinery, buildings, roads, artistic originals etc.) and improvements to non-produced assets.
• Gross Capital Formation measures the additions to the capital stock of buildings, equipment and inventories, i.e. additions to the capacity to
  produce more goods and income in the future. 
• Gross Fixed Capital Formation includes purchases of new assets within the domestic market like buildings, transport equipment, machinery, breeding stock etc.
• Change in stocks (inventories) consists of the difference between the opening stock and the closing stock.