Let capital formation = CF, Production = P, C = consumption. Then CF =_______?

A. P – C
B. P + C
C. PC
D. P/C

Correct Answer: Option A

A. P – C

Explanation

Capital Formation or capital accumulation refers to increasing a country’s stock of real capital. There must be increase in savings and reduction in consumption of consumer goods i.e consumption must be subtracted from production.