If net investment is 25 and depreciation is 15, what is the gross investment?
Answer and explanation
Correct answer: 40
The accounting relationship is: Net Investment = Gross Investment − Depreciation. Rearranging it gives: Gross Investment = Net Investment + Depreciation. Substituting the given values, Gross Investment = 25 + 15 = 40. Thus, gross investment is 40 because it includes both the addition to the capital stock and the amount needed to replace capital lost through depreciation. Subtraction would not give the required gross figure.
Frequently asked questions
What is the correct answer to this question?
40
Why is this the correct answer?
The accounting relationship is: Net Investment = Gross Investment − Depreciation. Rearranging it gives: Gross Investment = Net Investment + Depreciation. Substituting the given values, Gross Investment = 25 + 15 = 40. Thus, gross investment is 40 because it includes both the addition to the capital stock and the amount needed to replace capital lost through depreciation. Subtraction would not give the required gross figure.
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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