What is capital accumulation?

Capital accumulation refers to the process of gathering or increasing capital, which is typically achieved through investment or savings over time. This concept is fundamental in economics as it enables individuals, companies, and economies to build wealth and generate future income. By reinvesting profits or saving a portion of earnings, individuals and businesses can increase their capital base, which can later be deployed for further investments or to develop new ventures.

Having a strong understanding of capital accumulation is critical because it highlights the importance of long-term strategies in financial planning and economic growth. It contrasts with other concepts in finance, such as the total amount of capital at a specific time or the effects of depleting financial resources, which focus on static measures or negative financial trends rather than growth and wealth generation.