Answer to Question #105453 in Microeconomics for Jabulile

Question

Why is capital formation important to the south african economy

Answer 1

Fixed capital formation make a great contribution to the productive base of an economy providing purchasing and creation of necessary machinery, buildings and equipment. At the same time they contribute to the growth of employment and real GDP. Since the South Africa economy is small enough, it needs investments for development of the production, increase of export and import. This factors, beginnig from stable fixed capital formation and decreasing of uncertainty, caused sustain economic growth in this country since 1994.