Question

Why is capital considered to be ‘result of past savings’?

Answer 1

Capital is considered the result of past savings because capital goods, such as machines, buildings, and equipment, are purchased using money that has been saved earlier. Individuals or firms must first save a part of their income over time, and these accumulated savings are then invested to acquire capital goods. Therefore, since capital is created through previously saved income, it is known as the result of past savings.