In which situation is capital stock most likely to remain constant?
Answer and explanation
Correct answer: Gross investment equals depreciation
Capital stock changes according to net investment: Net investment = Gross investment − Depreciation. When gross investment equals depreciation, the difference is zero, so net investment is zero and the capital stock remains constant, assuming no other adjustment. If gross investment exceeds depreciation, the stock rises; if depreciation exceeds it, the stock falls. Hence option B is correct.
Frequently asked questions
What is the correct answer to this question?
Gross investment equals depreciation
Why is this the correct answer?
Capital stock changes according to net investment: Net investment = Gross investment − Depreciation. When gross investment equals depreciation, the difference is zero, so net investment is zero and the capital stock remains constant, assuming no other adjustment. If gross investment exceeds depreciation, the stock rises; if depreciation exceeds it, the stock falls. Hence option B is correct.
Which subject and chapter does this question cover?
This is a Class 11 Economics question. Chapter: National Income and Related Aggregates.
Student feedback
Was this question useful?
👍 0 Helpful 👎 0 Not helpful
Yes 0% No 0%
0 responsesStudent Reviews
No published reviews yet.
