What is obtained by subtracting depreciation from gross investment?
Answer and explanation
Correct answer: Net investment
The standard relation is net investment = gross investment − depreciation. Gross investment records all additions to capital, while depreciation records the part of existing capital consumed during the period. Subtracting depreciation therefore gives the genuine net addition to the capital stock. GDP, national wealth, and consumption expenditure are different aggregates and are not obtained from this subtraction.
Frequently asked questions
What is the correct answer to this question?
Net investment
Why is this the correct answer?
The standard relation is net investment = gross investment − depreciation. Gross investment records all additions to capital, while depreciation records the part of existing capital consumed during the period. Subtracting depreciation therefore gives the genuine net addition to the capital stock. GDP, national wealth, and consumption expenditure are different aggregates and are not obtained from this subtraction.
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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