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Encyclopedia entry: Capital Formation
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- Canadian Encyclopedia
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DONALD G. PATERSON
Canadian Encyclopedia
01-01-2002
Capital Formation
Author: DONALD G. PATERSON
Capital Formation The"capital stock" is one of the basic determinants of an economy's ability to produce income for its members. Composed of equipment, buildings and intermediate goods not themselves directly consumed, the capital stock produces a flow of services which, when combined with labour, yield"value-added," the sum of which is the value of all goods and services produced in the economy. This, in turn, is theNATIONAL INCOME received in the economy."Capital formation" is simply the enlargement of the capital stock. The higher the rate of capital ...