Explanation : Capital formation refers to capital accumulation, referring to the total "stock of capital" that has been formed, or to the growth of this total capital stock. It also refers to a measure of the net additions to the (physical) capital stock of a country (or an economic sector) in an accounting interval, or, a measure of the amount by which the total physical capital stock increased during an accounting period. Total capital formation" in national accounting equals net fixed capital investment, plus the increase in the value of inventories held, plus (net) lending to foreign countries, during an accounting period (a year or a quarter). Capital is said to be "formed" when savings are utilized for investment purposes, often investment in production. ....Read more