Which option correctly states the effect of gross investment and depreciation?
Answer and explanation
Correct answer: Gross investment increases capital and depreciation reduces capital
Gross investment represents additions to the capital stock through purchases or construction of capital goods. Depreciation represents existing fixed capital consumed through use, wear, or obsolescence. The change in capital stock is their difference: investment adds and depreciation subtracts. Therefore A correctly describes their opposite effects.
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What is the correct answer to this question?
Gross investment increases capital and depreciation reduces capital
Why is this the correct answer?
Gross investment represents additions to the capital stock through purchases or construction of capital goods. Depreciation represents existing fixed capital consumed through use, wear, or obsolescence. The change in capital stock is their difference: investment adds and depreciation subtracts. Therefore A correctly describes their opposite effects.
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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