Which statement best states the difference between gross investment and net investment?
Answer and explanation
Correct answer: Gross investment includes depreciation, while net investment has depreciation deducted
Gross investment is the total investment during a period, including expenditure that replaces depreciated capital. Net investment measures only the addition remaining after this capital loss is allowed for: Net investment = Gross investment − Depreciation. The other statements confuse investment with consumption or use unjustified words such as “always,” so they cannot be correct.
Frequently asked questions
What is the correct answer to this question?
Gross investment includes depreciation, while net investment has depreciation deducted
Why is this the correct answer?
Gross investment is the total investment during a period, including expenditure that replaces depreciated capital. Net investment measures only the addition remaining after this capital loss is allowed for: Net investment = Gross investment − Depreciation. The other statements confuse investment with consumption or use unjustified words such as “always,” so they cannot be correct.
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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