Which of the following statements is NOT correct?

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → Producing more capital goods now reduces the consumer goods the economy can produce in future.

The two ideas differ in time. In a given year, more capital goods mean fewer consumer goods. In future, more capital goods mean more consumer goods.

Option (1) With a given level of total output in a year, producing more capital goods means producing fewer consumer goods. — True. Final output is either consumption or investment, so there is a trade-off.

Option (2) Producing more capital goods raises the capacity of the economy to produce with the same number of labourers. — True. Workers have more equipment to work with.

Option (3) Producing more capital goods now reduces the consumer goods the economy can produce in future. — False. Higher capacity raises total output, so more consumer goods can be produced in future.

Option (4) Capital goods continue to serve the economy through different cycles of production. — True. They are not used up in one period of production.

NCERT (2026-27): “2.1 SOME BASIC CONCEPTS OF MACROECONOMICS … In fact capital goods continue to serve us through different cycles of production. … At a particular period, given a level of total output of the economy, it is true if more capital goods are produced less of consumer goods would be produced. But production of more capital goods would mean that in future the labourers would have more capital equipments to work with. We have seen that this leads to a higher capacity of the economy to produce with the same number of labourers. Thus total input itself would be higher compared to the case when less capital goods were produced. If total output is higher the amount of consumer goods that can be produced would surely be higher.”