What is capital accumulation?

Capital accumulation refers to the process of acquiring additional capital goods, such as machinery, tools, and buildings, which are essential for increasing production capacity in an economy. This accumulation is vital for economic growth, as it enables businesses to improve efficiency, produce more goods and services, and innovate. By investing in capital goods, firms can enhance their productivity, ultimately leading to greater output and higher profit margins.

The focus is on building up resources that facilitate production and drive economic development, which is why the acquisition of additional capital goods perfectly encapsulates the essence of capital accumulation.

The other options do not align with this definition. Reducing debt pertains to financial management rather than capital growth, increasing cash reserves refers to liquidity rather than productive capacity, and downsizing production aims at reducing costs, which contradicts the goal of enhancing production through capital accumulation.