Unit-5 Monetary and Financial Resources

This unit discusses these aspects which have a crucial bearing on the flow of monetary and financial resources needed for the development of the economy.

What do you understand by investment? Distinguish between gross capital formation and net capital formation.

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Learning Pundits Content Team

Written on Jun 26, 2019 3:46:52 PM

The concept of investment actually means ‘expenditure incurred on acquisition of capital goods’ that results in capital formation. We can distinguish between gross domestic capital formation (GDCF) and net domestic capital formation (NDCF). GDCF is defined as the sum of gross domestic fixed capital formation (GDFCF), changes in stocks in a year (CS), and the net acquisition of valuables (i.e. value of acquisition less value of disposals) by enterprises and households (NAV).

Symbolically: GDCF = GDFCF + CS + NAV

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