Correct Option
Capital formation involves increasing the stock of productive assets within an economy, such as infrastructure, machinery, and human capital (through education and skill development). This investment directly enhances the productive capacity of a country, enabling it to produce more goods and services. An increase in productive capacity leads to higher output, greater income generation, and consequently, sustained economic growth. Therefore, capital formation is a fundamental and necessary condition for economic growth.
Incorrect Options
Option 1: Technical progress in the world economy does not automatically guarantee economic growth in country X. For global technical progress to translate into domestic growth, country X must actively adopt, adapt, and integrate these advancements into its own production processes and economic structure. Without such internal mechanisms, external technical progress may not have a direct or necessary impact on its growth.
Option 2: Population growth in country X does not necessarily lead to economic growth. While a larger population can provide a larger labor force, if this growth is not accompanied by sufficient employment opportunities, capital investment, and improvements in productivity and human capital, it can lead to increased dependency ratios, strain on resources, and unemployment, potentially hindering economic growth rather than ensuring it.
Option 4: An increase in the volume of trade in the world economy does not automatically ensure economic growth in country X. For country X to benefit from global trade growth, it must be effectively integrated into the global trading system, possess competitive advantages in certain goods or services, and have policies that facilitate exports and beneficial imports. Without these conditions, a general increase in world trade may not translate into domestic economic growth for country X.