Which option gives the correct conclusion when gross investment is less than depreciation?
Answer and explanation
Correct answer: Net investment is negative
Net investment equals gross investment minus depreciation. When gross investment is smaller than depreciation, subtracting the larger amount produces a negative result: NI = GI − D < 0. New investment then fails to replace all worn-out capital, so the capital stock declines. This does not mean gross investment is zero, making option B the correct conclusion.
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What is the correct answer to this question?
Net investment is negative
Why is this the correct answer?
Net investment equals gross investment minus depreciation. When gross investment is smaller than depreciation, subtracting the larger amount produces a negative result: NI = GI − D < 0. New investment then fails to replace all worn-out capital, so the capital stock declines. This does not mean gross investment is zero, making option B the correct conclusion.
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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