Tag: economy of a village

During boom market condition, the economy flourishes,investment rises and thus capital formation rises and during depression period , market sinks down and rate of capital formation falls.

Higher income and low taxation  causes the people to save more ,and thus investment rises which in turn leads to higher rate of capital formation.

The prosperity of a country helps to provide the citizens with more investment channels and thus people tend to save more but during depression period of an economy ,market sinks down and falls into a low -equilibrium trap which results in less investment,less savings and low rate of capital formation.

Insufficient options to invest in an economy results in low net capital accumulation during a period of time in an economy since the people of that economy is left with very few options to invest.

Plant and machinery are Producers goods. Together with stocks and work in progress, these goods are collectively termed 'Capital'.

Capital formation means the net accumulation of stock in a country during a particular accounting period.

Capital is used as a factor of production in economics as it helps in production process and helps to increase the productivity.

Interest is known as the cost of capital as a factor of production.For instance, when we keep a certain amount in bank,we get some extra money with the principle amount .This extra amount is known as interest.

Buildings,machinery,other equipment used in production process -all are regarded as capital in economics as these are fixed assets and helps to increase productivity in an economy.

Machines are the capital goods as machines are used in producing other goods ,rather than being bought by consumers.