What is Gross Domestic Capital Formation?

Question

Can someone please define it to me in layman's terms? :)

Thanks!

Answer 1

It is just how many net (added minus deducted or invested minus de-invested) capital were added over certain period within selected country. Gross means that depreciation is not taken into account. It is flow value.

If we will deduct depreciation of capital in certain economy then we will get Net capital formation - this will mean that certain volume of capital were added as production factor.

Sometimes depreciation is higher than gross capital formation - so this will mean fall in capital stock (actual de-investment due to wearing off of capital).