In which situation does gross investment only maintain capital stock and not increase it?
Answer and explanation
Correct answer: Gross investment equals depreciation
Capital stock is maintained without a net increase when gross investment exactly covers depreciation. In that case, net investment = gross investment − depreciation = 0. If gross investment exceeds depreciation, capital stock rises. The zero-zero option describes no investment and no depreciation rather than replacement of worn-out capital, while negative depreciation is not the relevant standard condition.
Frequently asked questions
What is the correct answer to this question?
Gross investment equals depreciation
Why is this the correct answer?
Capital stock is maintained without a net increase when gross investment exactly covers depreciation. In that case, net investment = gross investment − depreciation = 0. If gross investment exceeds depreciation, capital stock rises. The zero-zero option describes no investment and no depreciation rather than replacement of worn-out capital, while negative depreciation is not the relevant standard condition.
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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