Question

"Machine purchased by a firm is always a capital good."

Do you agree with the given statement? Give valid reasons for your answer.

Options

• Agree

• Disagree

Answer 1

I disagree with the given statement.

Explanation:

Capital goods are those final goods which help in the production of other goods and services. A machine purchased by a firm will be a capital good when it is used for the production of other goods and services. However, if it is purchased by a firm for resale purposes in the same year, it will be considered as an intermediate good and not a capital good.