If gross investment only replaces worn-out capital and no extra machine is installed, what will net investment be?
Answer and explanation
Correct answer: Zero
When gross investment is used only to replace worn-out capital, it is exactly equal to depreciation. Applying the formula net investment = gross investment − depreciation gives zero. The economy therefore maintains its existing capital stock but does not expand it. Net investment would be negative only if gross investment were insufficient to cover depreciation.
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What is the correct answer to this question?
Zero
Why is this the correct answer?
When gross investment is used only to replace worn-out capital, it is exactly equal to depreciation. Applying the formula net investment = gross investment − depreciation gives zero. The economy therefore maintains its existing capital stock but does not expand it. Net investment would be negative only if gross investment were insufficient to cover depreciation.
Which subject and chapter does this question cover?
This is a Class 11 Economics question. Chapter: National Income and Related Aggregates.
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