Which of the following statements is true?

Statement 1- The part of the income which we use as expenditure is linked with investment.

Statement 2- Excess of production over consumption is called as capital formation.

Only statement 2 is true

Out of the 3 economic activities, one is investment (capital formation), which can be defined as that part of income which is not used in the form of expenditure. In other words, we can say it is the surplus of production (income) over consumption (expenditure).