Replacement investment is most closely related to what?
Answer and explanation
Correct answer: Replacement of worn-out capital
Replacement investment is expenditure on replacing machines, equipment or other fixed assets that have been worn out, damaged or consumed in production. It maintains existing productive capacity but does not by itself increase the capital stock. Net capital growth occurs when gross investment exceeds depreciation. Household consumption and a foreign trade deficit are separate economic concepts and are not replacement investment.
Frequently asked questions
What is the correct answer to this question?
Replacement of worn-out capital
Why is this the correct answer?
Replacement investment is expenditure on replacing machines, equipment or other fixed assets that have been worn out, damaged or consumed in production. It maintains existing productive capacity but does not by itself increase the capital stock. Net capital growth occurs when gross investment exceeds depreciation. Household consumption and a foreign trade deficit are separate economic concepts and are not replacement investment.
Which subject and chapter does this question cover?
This is a Class 11 Accountancy question. Chapter: Depreciation, Provisions, and Reserves.
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