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# Capital Replacement

## Definition

The process by which worn-out or consumed capital goods are restored through new production, ensuring the continuation of productive capacity. This function is essential for maintaining economic output over time.

## Source Chapter

Book II, Chapter 4

## Context

Smith distinguishes between capital used for replacement and capital used for expansion, arguing that the portion of annual produce destined for replacement but not employed by its owners constitutes the pool available for lending at interest.

## Economic Domain

Accumulation

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