Multiple choice economics concept of consumption function, saving function and investment function capital economy of a village wealth, capital and money Capital Formation means ___________________. A sustained increase in the stock of real capital in a country. Production of more capital goods, which are used for further production of goods. Investment All of the above Reveal answer Fill a bubble to check yourself D Correct answer Explanation Capital formation encompasses the entire process of increasing the stock of real capital, which includes the production of capital goods and the act of investment that adds to the productive capacity of the economy.