Question

Distinguish between stocks of capital goods and capital formation using a suitable example.

Answer 1

	Stocks of capital goods	Capital formation
1.	The stock of capital goods refers to the total amount of capital goods at a particular point in time.	Capital formation, on the other hand, involves an increase in the stock of capital goods during a certain time period.
2.	Example: The number of machines as of March 31, 2015, in stock.	Example: The purchase of new machines during 2014-15 is capital formation.