An addition to the stock of physical capital and additional changes in the inventory of a producer is known as?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Investment
A firm that buys a new machine or puts up a building is not using anything up; it is adding to the stock of physical capital that will produce more in the future. Goods it has produced but not yet sold are also added to its stock, its inventory. Both kinds of addition together, the addition to physical capital and the change in the inventory of a producer, are called investment.
Why the other options are incorrect
Option (1) Consumption — Incorrect. Consumption is the purchase of goods and services that are used up in satisfying wants now; it adds nothing to the stock of capital.
Option (2) Multiplier — Incorrect. The multiplier is a ratio, not a kind of spending: the total rise in output divided by the rise in autonomous expenditure that set it off.
Option (3) Autonomous revenue — Incorrect. There is no such term.
Note: A same/similar question was asked in CUET (UG) in the papers below.
| 2026 | 2025 | 2024 | 2023 | 2022 |
| 31-05 S1 | 13-05 S2* 31-05 S1* | – | 30-05 S1* 13-06 S3* | – |
* A similar question.
NCERT (2025-26): “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.…” |