Which option correctly shows the structure of gross investment?
Answer and explanation
Correct answer: Net investment and depreciation
Gross investment consists of net investment plus replacement investment. Depreciation represents the value of capital that must be replaced, so the accounting identity is gross investment = net investment + depreciation. Consumption and saving describe uses of income, taxes and subsidies are fiscal items, and exports and imports concern foreign trade; none of those pairs defines gross investment.
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What is the correct answer to this question?
Net investment and depreciation
Why is this the correct answer?
Gross investment consists of net investment plus replacement investment. Depreciation represents the value of capital that must be replaced, so the accounting identity is gross investment = net investment + depreciation. Consumption and saving describe uses of income, taxes and subsidies are fiscal items, and exports and imports concern foreign trade; none of those pairs defines gross investment.
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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