The term 'Capital Formation' is essential for economic growth because it:
A. Has no relation to productivity
B. Only increases consumption
C. Increases the stock of productive assets
D. Reduces the productive capacity of the economy
Answer: Option C
Solution (By JKSSB Mock Tests)
Capital formation involves net addition to the stock of capital goods, which enhances the productive capacity of the economy and supports long-term growth.
Explanation:
Shadow banking comprises non-bank financial intermediaries and activities that perform bank-like functions—maturity, credit and liquidity transformation—but operate with less regulation and without direct access to central-bank liquidity.
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