Importance (role) of capital accumulation in economic environment/development
- It leads to technological development in form of inventions and innovations. This leads to the production of goods and services in large quantities and of high quality hence economic growth and development.
- It increases the standards of living. This is due to increased incomes of individuals and production of a variety and better quality goods and services which are consumed at lower prices.
- It facilitates resource exploitation. This increases production and investments in the industrial, agricultural and service sectors hence economic growth and development.
- It helps to create employment opportunities in the economy. This is due to increased investments and production activities in the economy.
- It facilitates the construction social overheads in form of roads, railways etc. This increases mobility of factors of production
- It helps to reduce on the level of inflation in the economy. The increased production of goods and services helps to meet the high aggregate demand for goods and services. In addition, capital accumulation reduces the supply rigidities associated with the production of goods especially in the agricultural sector. This increases supply in the long run hence economic stability.
- It helps to solve the balance of payment problems. This is as a result of increased production of high quality goods and services for export which helps the government to earn more foreign exchange. In addition, capital accumulation leads to establishment of import substituting industries and this reduces on the importation of high valued manufactured goods. Therefore, the gap between export earnings and import expenditure is reduced hence favourable balance of payments.
- It brings about market expansion through establishment of social and economic infrastructure. This facilitates trade and economic development.
- It increases the national income of the country. This is as a result of increased production and economic activities resulting from capital accumulation.
- It helps to relieve the country from the burden of the foreign debt. This is because capital accumulation increases resource exploitation and mobilization which increases the country’s capacity to be self-sufficient and reliant.
- Capital facilitates production of quality goods and service.
- Capital facilitates specialization
CATEGORIES Economics
TAGS Dr. Bbosa Science
