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Question
Which of the following goods will be considered circulating capital?
Options
Computers in the office
The factory buildings
The furniture used by the workers
Water used in the production process
Solution
Water used in the production process
Explanation:
- Circulating capital refers to assets that are used up or consumed in the production process and must be replenished regularly. Water used in the production process is an example of circulating capital because it is consumed as part of the production cycle and must be replaced.
- Other options, such as computers, factory buildings, and furniture, are examples of fixed capital because they are long-term assets used in production but not consumed in the process.
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