What does negative net investment mean?
Answer and explanation
Correct answer: Capital stock may decrease
Negative net investment occurs when depreciation is greater than gross investment. In that case, investment replaces only part of the capital consumed during the period, so the total capital stock can fall. It does not mean gross investment is necessarily zero. The decisive test is gross investment minus depreciation being less than zero.
Frequently asked questions
What is the correct answer to this question?
Capital stock may decrease
Why is this the correct answer?
Negative net investment occurs when depreciation is greater than gross investment. In that case, investment replaces only part of the capital consumed during the period, so the total capital stock can fall. It does not mean gross investment is necessarily zero. The decisive test is gross investment minus depreciation being less than zero.
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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