Question 49

Human capital formation refers to the process of improving the productive capacities of a population through investments in education, health, skills, and knowledge. It treats human beings as assets that can be enhanced to contribute more to economic output.

1. individuals of a country to accumulate more capital. While human capital can lead to higher incomes and thus potentially more financial capital accumulation, this statement describes a potential *outcome* rather than the core process of human capital formation itself. Human capital is about improving human capabilities, not just financial wealth accumulation.

2. increasing the knowledge, skill levels and capacities of the people of the country. This is a core and direct explanation of human capital formation. Investments in education, training, and healthcare directly enhance these attributes.

3. accumulation of tangible wealth. Tangible wealth refers to physical assets like buildings, machinery, infrastructure, etc. Human capital, on the other hand, is an intangible asset.

4. accumulation of intangible wealth. This is correct. Human capital (knowledge, skills, health, creativity) constitutes an intangible form of wealth that enhances a nation's productive potential.

Therefore, statements 2 and 4 correctly explain human capital formation.