Addition to the stock of physical capital and changes in the inventory of a producer is known as .......
Addition to the stock of physical capital and changes in the inventory of a producer is known as .......
Solution
Option 1: Asset -> Assets are resources owned, not specifically additions to capital.
Option 2: Expenditure -> Refers to spending, not capital formation specifically.
Option 3: Investment -> Includes additions to physical capital stock and inventory changes.
Option 4: Aggregate Demand -> Total demand in economy, broader concept.
Hence, Option 3: Investment -> In economics, investment refers to gross fixed capital formation (additions to physical capital like machinery, buildings, equipment) and changes in inventories. This is distinct from financial investment (stocks/bonds). It represents the creation of productive capacity in an economy and is a key component of GDP calculated by the expenditure method -> correct
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