If investment includes not only the purchase of new machines but also the replacement of old capital, what is it called?
Answer and explanation
Correct answer: Gross investment
Gross investment is the total investment expenditure during a period. It includes replacement investment, which maintains the existing capital stock, and additional investment, which expands it. Net investment is obtained after deducting depreciation from gross investment. Depreciation is the loss of capital itself, while a transfer payment is not expenditure on productive capital formation.
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What is the correct answer to this question?
Gross investment
Why is this the correct answer?
Gross investment is the total investment expenditure during a period. It includes replacement investment, which maintains the existing capital stock, and additional investment, which expands it. Net investment is obtained after deducting depreciation from gross investment. Depreciation is the loss of capital itself, while a transfer payment is not expenditure on productive capital formation.
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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