A firm constructing a warehouse for storing goods will come under which type of expenditure?
Answer and explanation
Correct answer: Investment expenditure
A warehouse is a fixed asset that provides storage services to the firm for several years. Spending on its construction adds to the firm’s productive and business capacity and is therefore investment expenditure, specifically fixed capital formation. It is not household consumption, a transfer payment, or government consumption because the asset is created for business use.
Frequently asked questions
What is the correct answer to this question?
Investment expenditure
Why is this the correct answer?
A warehouse is a fixed asset that provides storage services to the firm for several years. Spending on its construction adds to the firm’s productive and business capacity and is therefore investment expenditure, specifically fixed capital formation. It is not household consumption, a transfer payment, or government consumption because the asset is created for business use.
Which subject and chapter does this question cover?
This is a Class 12 Economics question. Chapter: National Income and Related Aggregates. Topic: Methods of calculating national income - Expenditure Method.
