If gross investment and depreciation are both high but the difference between them is small, which conclusion is most correct?
Answer and explanation
Correct answer: Net investment is small
Net investment is determined by the difference between gross investment and depreciation: Net investment = Gross investment − Depreciation. Therefore, even if both figures are large, a small difference means that net investment is small. Much of the gross investment may simply replace worn-out capital. The other options do not follow from the given relationship.
Frequently asked questions
What is the correct answer to this question?
Net investment is small
Why is this the correct answer?
Net investment is determined by the difference between gross investment and depreciation: Net investment = Gross investment − Depreciation. Therefore, even if both figures are large, a small difference means that net investment is small. Much of the gross investment may simply replace worn-out capital. The other options do not follow from the given relationship.
Which subject and chapter does this question cover?
This is a Class 11 Economics question. Chapter: National Income and Related Aggregates.
Student feedback
Was this question useful?
👍 0 Helpful 👎 0 Not helpful
Yes 0% No 0%
0 responsesStudent Reviews
No published reviews yet.
