capital formation

Definition

The transfer of savings from households and governments to the business sector, resulting in increased output and economic expansion.

Use capital formation in a sentence

Due to the extra tax revenue, they were able to use it for capital formation with the hopes that the extra capital would kickstart the economy.

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When looking at the broad spectrum of his business's success, he realized that capital formation had a lot to do with the rise in sales and employee salaries.

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Citizens and governments have a direct impact on capital formation through individuals and government investments, if all citizens of a particular country are investing 10% of their wages into local businesses and upcoming technologies, the companies they are investing in will have enough funds to continue research and development instead of only offering their current products.

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