Why is gross investment generally greater than net investment?
Answer and explanation
Correct answer: Because it includes depreciation also
Gross investment measures total spending on capital goods before depreciation is deducted. Net investment is gross investment minus the capital consumed during the period. Thus, whenever depreciation is positive, gross investment is larger by that amount. The difference is not caused by consumption, taxes, or imports, which belong to other accounting categories.
Frequently asked questions
What is the correct answer to this question?
Because it includes depreciation also
Why is this the correct answer?
Gross investment measures total spending on capital goods before depreciation is deducted. Net investment is gross investment minus the capital consumed during the period. Thus, whenever depreciation is positive, gross investment is larger by that amount. The difference is not caused by consumption, taxes, or imports, which belong to other accounting categories.
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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