Purchase of a car by a household is an example of:
Show Hint
- Capital formation
- Intermediate consumption
- Final consumption
- Inventory investment
The Correct Option is C
Solution and Explanation
In National Income Accounting, expenditure is classified based on who buys the good and what purpose it serves.
Step 2: Detailed Explanation:
- Final Consumption: Goods and services purchased by households for personal use.
- Capital Formation: Purchase of capital goods by a firm for productive use.
- Intermediate Consumption: Goods used in the production of other goods.
A car purchased by a household is for personal, final use, not for resale or production. Hence it is classified as Final Consumption Expenditure (Private Final Consumption Expenditure).
Note: If the same car were purchased by a firm for use in production, it would be Capital Formation.
Step 3: Final Answer:
Purchase of a car by a household is an example of Final Consumption.
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