Assertion (A): A rise in a firm’s stock of unsold finished goods during a year is a part of investment.
Reason (R): A firm’s stock of unsold finished goods is treated as intermediate goods, like raw materials.
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → (A) is true but (R) is false.
Assertion (A): A rise in a firm’s stock of unsold finished goods during a year is a part of investment. — True. Investment includes changes in the inventory, the stock of finished goods of a producer.
Reason (R): A firm’s stock of unsold finished goods is treated as intermediate goods, like raw materials. — False. Finished goods are final goods. Intermediate goods are things like raw materials that are used up in production.
NCERT (2026-27): “4.1.2 Investment Investment is defined as addition to the stock of physical capital (such as machines, buildings, roads etc., i.e. anything that adds to the future productive capacity of the economy) and changes in the inventory (or the stock of finished goods) of a producer. Note that ‘investment goods’ (such as machines) are also part of the final goods – they are not intermediate goods like raw materials. Machines produced in an economy in a given year are not ‘used up’ to produce other goods but yield their services over a number of years. Investment decisions by producers, such as whether to buy a new machine, depend, to a large extent, on the market rate of interest. However, for simplicity, we assume here that firms plan to invest the same amount every year. …” |