explain whether the following terms are true or false :
1) the same good may be a consumption good or capital good , depending on its end use
2) gross investment may occur even when net investment is zero
3) inventory investment includes change in stock of consumer goods with the producers
Dear Student, the answer given by Prakhar is right.
1. True, the same good may be a consumption good or a capital good depending on its end usage. This is because if a good, for instance, wood, is used for final consumption by the household for cooking purposes, it would be considered as a consumption good. However, if the same good is used by industries as an input to manufacture other goods such as chair, then it would be considered as a capital good.
2. False, gross investment cannot occur when net investment is zero. This is because the difference between gross investment and net investment is depreciation and so gross is more than net. Thus, in case net investment is given as zero, gross investment cannot occur.
3. True, inventory investment includes change in stock of consumer goods with the producers. Inventory investment is primarily the difference between the goods sold and the goods produced in an year. This is because there may be some goods that were sold this year but manufactured in the previous year and some goods that were produced this year but will be sold in the next year. Thus, this change in stock is taken case of in the inventory investment.
In case of any doubt, do get back to us.
1. True, the same good may be a consumption good or a capital good depending on its end usage. This is because if a good, for instance, wood, is used for final consumption by the household for cooking purposes, it would be considered as a consumption good. However, if the same good is used by industries as an input to manufacture other goods such as chair, then it would be considered as a capital good.
2. False, gross investment cannot occur when net investment is zero. This is because the difference between gross investment and net investment is depreciation and so gross is more than net. Thus, in case net investment is given as zero, gross investment cannot occur.
3. True, inventory investment includes change in stock of consumer goods with the producers. Inventory investment is primarily the difference between the goods sold and the goods produced in an year. This is because there may be some goods that were sold this year but manufactured in the previous year and some goods that were produced this year but will be sold in the next year. Thus, this change in stock is taken case of in the inventory investment.
In case of any doubt, do get back to us.