In which situation can gross investment be treated as only replacement investment?
Answer and explanation
Correct answer: When gross investment equals depreciation
Replacement investment is the amount required to offset depreciation. When gross investment exactly equals depreciation, the entire investment is used to replace worn-out capital. Net investment is then zero, so the capital stock does not receive any additional increase. Positive net investment would mean that gross investment exceeds replacement needs, while negative net investment would indicate incomplete replacement.
Frequently asked questions
What is the correct answer to this question?
When gross investment equals depreciation
Why is this the correct answer?
Replacement investment is the amount required to offset depreciation. When gross investment exactly equals depreciation, the entire investment is used to replace worn-out capital. Net investment is then zero, so the capital stock does not receive any additional increase. Positive net investment would mean that gross investment exceeds replacement needs, while negative net investment would indicate incomplete replacement.
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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