What creates the main difference between gross investment and net investment?
Answer and explanation
Correct answer: Depreciation
Gross investment includes total spending on capital goods, including replacement of capital used up during production. Net investment removes the depreciation component and shows only the addition to the capital stock. Thus, gross investment − net investment = depreciation. Taxes, private consumption, and transfer income may affect other economic measures but do not define this gross-net investment difference.
Frequently asked questions
What is the correct answer to this question?
Depreciation
Why is this the correct answer?
Gross investment includes total spending on capital goods, including replacement of capital used up during production. Net investment removes the depreciation component and shows only the addition to the capital stock. Thus, gross investment − net investment = depreciation. Taxes, private consumption, and transfer income may affect other economic measures but do not define this gross-net investment difference.
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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