In which situation is the economy's productive capacity more likely to rise?
Answer and explanation
Correct answer: Net investment is positive
Positive net investment means gross investment exceeds depreciation. After replacing worn-out machines, buildings, and equipment, some additional capital remains, so the capital stock and likely productive capacity increase. Equality only maintains the stock, while negative net investment can reduce it. Actual output also depends on technology and how fully resources are used.
Frequently asked questions
What is the correct answer to this question?
Net investment is positive
Why is this the correct answer?
Positive net investment means gross investment exceeds depreciation. After replacing worn-out machines, buildings, and equipment, some additional capital remains, so the capital stock and likely productive capacity increase. Equality only maintains the stock, while negative net investment can reduce it. Actual output also depends on technology and how fully resources are used.
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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