Consider the following statements about investment, as defined in NCERT:
(A) Inventories are left out of investment, as they are goods that are not sold.
(B) Anything that adds to the future productive capacity of the economy is an addition to physical capital.
(C) Raw materials used up in production are investment goods.
(D) Changes in the inventory of a producer are a part of investment.
(E) Building a new road adds to the stock of physical capital.
Which of the statements given above are correct?
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → (B), (D) and (E) only
(A) Inventories are left out of investment, as they are goods that are not sold. — Incorrect. Changes in inventory are a part of investment.
(B) Anything that adds to the future productive capacity of the economy is an addition to physical capital. — Correct. Physical capital is anything that adds to future productive capacity.
(C) Raw materials used up in production are investment goods. — Incorrect. Raw materials are intermediate goods, not investment goods.
(D) Changes in the inventory of a producer are a part of investment. — Correct. Investment includes changes in the stock of finished goods.
(E) Building a new road adds to the stock of physical capital. — Correct. Roads are named as physical capital.
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. …” |