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Which of the following situations involves an investment in capital goods?

A. A restaurant starts opening earlier so it can serve lunch.
B. A company pays its employees’ graduate school tuition.
C. A farmer buys a new tractor to replace his old one.
D. A government starts providing kindergarten.

User Ttaaoossuu
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Final answer:

The purchasing of c. a new tractor by a farmer is an investment in capital goods. Capital goods are assets that firms use to produce goods or services, crucial for maintaining or increasing productivity.

Step-by-step explanation:

Among the options provided, the situation that involves an investment in capital goods is when a farmer buys a new tractor to replace his old one. Capital goods refer to physical assets like machinery, buildings, or equipment that an organization uses to produce goods or services. Investment in these assets is essential for the maintenance and enhancement of production capabilities. Firms often finance such capital investments through various means such as early-stage investors, reinvesting profits, borrowing from banks or issuing bonds, and selling stock. Importantly, these assets contribute significantly to the productivity and profitability of firms over time.

Out of the given options, buying a new tractor to replace an old one is an example of an investment in capital goods. Capital goods refer to long-lasting assets that are used in the production of goods or services. The new tractor is a capital good because it is a productive asset that will increase the farmer's efficiency and productivity. The other options, such as a restaurant opening earlier, a company paying tuition, and the government providing kindergarten, do not involve investments in capital goods.

User Kasun Jalitha
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