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Physical capital formation refers to the process of increasing the stock of physical assets in an economy, such as buildings, machinery, and infrastructure. It involves investing in the construction, expansion, or improvement of these physical assets to enhance production capacity and facilitate economic growth. Physical capital formation is essential for stimulating productivity growth and improving overall living standards in a country.

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1y ago

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Which capital is known as physical capital?

Fixed capital is known as Physical capital


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Gross Capital Formation (GCF) is calculated by summing up the total investments made in fixed assets (such as buildings, machinery, and infrastructure) and changes in inventory levels within a specific period. It can be expressed using the formula: GCF = Gross Fixed Capital Formation + Changes in Inventories. This measure reflects the net increase in physical assets and is crucial for assessing economic growth and investment trends.


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