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What does it mean by Human Capital Formation?
1. Development of Infrastructure for the Economy
2. Development of abilities and skills of people
3. Increase in the stock of machines, equipment, buildings in the Economy
4. Growth of Bank deposits

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Correct Answer - Option 2 : Development of abilities and skills of people

The correct answer is Development of abilities and skills of people.

  • Human Capital is a measure of the skills, education, capacity, and attributes of labor that influence their productive capacity and earning potential.
  • Individual human capital is the skills and abilities of individual workers.
  • The Human capital of the economy is the aggregate human capital of an economy, which will be determined by national educational standards.

  • Factors that determine human capital
    • Skills and qualifications.
    • Education levels.
    • Work experience.
    • Social skills – communication.
    • Intelligence.
    • Emotional intelligence.
    • Judgment.
    • Personality – hard-working, harmonious in an office.
    • Habits and personality traits.
    • Creativity. Ability to innovate new working practices/products.
    • Fame and brand image of an individual. e.g. celebrities paid to endorse a product.
    • Geography – Social peer pressure of the local environment can affect expectations and attitudes.

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