Which of the following is not an investment expenditure in goods & services?

A. Purchase of machinery
B. An increase in business inventories
C. Expansion of the main plant of a company

D. Purchase of a house

Ans. (C) Expansion of the main plant of a company

Explanation :

Investment expenditures are used to purchase a wide variety of capital goods -literally hundreds of thousands. However, in the macroeconomic analysis of investment, these expenditures are commonly divided into three categories:

• Nonresidential Fixed Investment: This includes expenditures on what is most commonly thought of as capital goods, such as factories and machinery. Examples include buildings, pipelines, oil wells, computers, and vehicles. It constitutes about 70 percent of investment expenditures. 

• Residential Fixed Investment: This includes expenditures on houses, apartments buildings, and similar types of shelter. Residential fixed investment includes structures built, owned, and occupied by individuals as well as those run by profit-minded businesses. Residential fixed investment is typically just under 30 percent of investment expenditures. 

• Changes in Private Inventories: Inventories are stockpiles of raw materials, intermediate goods, and finished products that businesses use to smooth the flow of production and sales. Businesses typically make planned investments in their inventories, such as when a new retail store is opened. However, in some cases unplanned changes in business inventories arise due to a mismatch between production and sales. Changes in private inventories, whether planned or not, are usually in the range of 2 to 5 percent of investment expenditures.

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