Answer to Question #104332 in Microeconomics for Mfumo

Question

Why is capital formation important in South Africa

Answer 1

Fixed capital formation is an important but generally volatile component of aggregate spending. It is important in that it adds to the productive capacity of an economy. It is value-adding in the sense that it contributes to the growth potential of an economy, but it tends to be volatile as it entails substantial capital commitments based on uncertain expectations