With reference to physical capital in Indian economy, consider the following pairs: Items Category 1. Farmer’s plough Working capital 2. Computer Fixed capital 3. Yarn used by the weaver Fixed capital 4. Petrol Working capital How many of the above pairs are correctly matched?

1. A. Only one
2. B. Only two
3. C. Only three
4. D. All four

Answer: B

Explanation

Physical capital in an economy is broadly categorized into fixed capital and working capital: – Fixed Capital: Assets that are used repeatedly over a long period in the production process (e.g., machinery, buildings, tools). – Working Capital: Raw materials, intermediate goods, and cash that are used up or transformed in a single production cycle or short-term operations. Let’s evaluate the pairs: 1. Farmer’s plough – Working capital: Incorrect. A plough is a durable tool used over many seasons, making it fixed capital. 2. Computer – Fixed capital: Correct. A computer is a long-lasting asset used in production or services over an extended period. 3. Yarn used by the weaver – Fixed capital: Incorrect. Yarn is a raw material that is consumed and transformed into cloth in a single production cycle, making it working capital. 4. Petrol – Working capital: Correct. Petrol is a fuel consumed during the production or transportation process, making it working capital. Therefore, only two pairs (2 and 4) are correctly matched. This question tests fundamental economic concepts related to factors of production.