When will gross investment be equal to net investment?
Answer and explanation
Correct answer: When depreciation is zero
The accounting identity is net investment = gross investment − depreciation. Gross and net investment can therefore have the same value only when depreciation is zero. Consumption, exports, and tax rates do not establish this equality. Whenever depreciation is positive, net investment is smaller than gross investment by exactly the depreciation amount.
Frequently asked questions
What is the correct answer to this question?
When depreciation is zero
Why is this the correct answer?
The accounting identity is net investment = gross investment − depreciation. Gross and net investment can therefore have the same value only when depreciation is zero. Consumption, exports, and tax rates do not establish this equality. Whenever depreciation is positive, net investment is smaller than gross investment by exactly the depreciation amount.
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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