Question

Classify the following into an intermediate good and a final good. Give reasons for your answer.

Purchase of machinery for installation in a factory.

Answer 1

The purchase of machinery for installation in a factory is a final good.

Reasons:

• The machinery is acquired for continuous utilization in the production process and is not intended for resale or temporary use.
• It is classified as a capital good due to its role in facilitating future production.
• Due to its utilization for investment purposes and its contribution to the economy's capital stock, it is categorized as a final good in national income accounting.
• Final goods include investment items, such as machinery, utilized by producers for continuous manufacturing purposes.