Which of the following is NOT a component of investment?
Show answer & explanation
Correct answer: B
Explanation
The correct answer is option 2 i.e. Money spent on purchasing shares of a company.
"Money spent on purchasing shares of a company." This is not a component of investment in economic terms because buying shares merely transfers ownership and does not create new capital goods or increase productive capacity.
Other Options:
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Addition to residential construction – Building houses adds to physical capital stock, contributing to economic growth.
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Machinery and equipment employed by a firm – Purchasing machinery enhances production capacity, qualifying as business investment.
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Inventories of raw materials stocked by a firm – Holding inventories counts as investment since it supports future production.
Investment in economics refers to physical asset creation, not financial transactions like share purchases.