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Increase in the quantum of  saving 2. Mobilization of savings 3. Investments of savings into economics activity that creates sets and genarates income.

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Capital formation means increases capital in business giving advertisements or taking money from public as investment or inform of capital by issuing shares and debentures
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Increase in the volume of real saving 2. Mobilization of savings 3. Investments of savings in creating real assets.

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Process of Capital Formation:

The process of capital formation involves three steps:

(1) Increase in the volume of real savings;

(2) Mobilisation of savings through financial and credit institutions; and

(3) Investment of savings.

Thus the problem of capital formation becomes two-fold: one, how to save more; and two, how to utilise the current savings of the community for capital formation.

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