Previous year MCQs

Economy UPPSC 2021 GS-I
Question

With reference to the "Capital formation" which of the statements is/are correct?

1. Process of capital formation depends on savings and effectiveness of financial institutions.
2. Investment is the essential factor of capital formation.

Select the correct answer using the codes given below.
Codes :

Answer & Solution

Answer: (Detailed Solution Below)

Option C: Both 1 and 2

Detailed Solution:

The correct answer is “Both 1 and 2”.
Savings and effective financial institutions are crucial for capital formation. Savings provide the necessary funds for investment, and efficient financial institutions channel these savings into productive investments.

Investment is indeed the essential factor of capital formation. It involves using savings to create new capital goods, such as machinery, equipment, and infrastructure, which can increase production capacity and economic growth.

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Code:
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