If net investment is positive, which conclusion about national capital stock is most suitable?
Answer and explanation
Correct answer: Capital stock tends to increase
Positive net investment means that gross investment exceeds depreciation. After replacing the capital that has worn out, some additional investment remains, so the capital stock tends to increase. It does not mean depreciation is greater than gross investment; that condition would produce negative net investment. The other options are inconsistent with the definition of net investment.
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What is the correct answer to this question?
Capital stock tends to increase
Why is this the correct answer?
Positive net investment means that gross investment exceeds depreciation. After replacing the capital that has worn out, some additional investment remains, so the capital stock tends to increase. It does not mean depreciation is greater than gross investment; that condition would produce negative net investment. The other options are inconsistent with the definition of net investment.
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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