Gross investment and depreciation

Correct answer: B. 600

Explanation: First calculate depreciation: 25% of 800 = (25/100) × 800 = 200. Net investment is gross investment minus depreciation, so net investment = 800 − 200 = 600. Therefore, option B is correct. The value 200 is depreciation, not net investment; 800 is the original gross investment, and 1000 results from adding instead of deducting depreciation.

Correct answer: B. 240

Explanation: Gross investment is 240 more than depreciation, so gross investment = 150 + 240 = 390. Net investment = gross investment − depreciation = 390 − 150 = 240. Thus the difference stated in the question becomes the net investment in this particular setup. The other options confuse gross investment or depreciation with the required net amount.

Correct answer: C. 220

Explanation: Use gross investment = net investment + depreciation. Substituting the values gives gross investment = −80 + 300 = 220. The negative sign shows that capital stock decreased after depreciation, but gross investment itself remains positive because investment of 220 was made. Adding the absolute values would incorrectly give 380.

Correct answer: A. Depreciation shows the fall in the value of capital stock due to wear and obsolescence

Explanation: Depreciation is the loss in the value or productive capacity of fixed capital because of wear, use, or obsolescence. It reduces the net value of capital and is deducted from gross measures to obtain net measures. It does not increase capital stock, represent consumer-goods sales, or get added in every national-income calculation.

Correct answer: B. Replacement investment replaces depreciated capital, while net investment is the net addition to capital stock

Explanation: Replacement investment maintains the existing capital stock by replacing assets lost through depreciation. Net investment is the amount left after depreciation is covered: gross investment minus depreciation. It represents the net addition or subtraction from capital stock. Therefore, replacement investment is maintenance, whereas net investment measures actual change in productive capacity.

Correct answer: D. 200

Explanation: Gross investment includes both replacement investment and investment that adds to productive capacity. Therefore, gross investment = replacement expenditure + additional investment = 120 + 80 = 200. The replacement part merely maintains existing capacity, while the additional truck increases capacity; however, both are included in gross investment.

Correct answer: A. 80

Explanation: Net investment measures the addition to the capital stock after allowing for replacement of worn-out capital. The 120 spent on replacing the old truck only maintains the existing stock, so it is treated as depreciation replacement. The additional 80 creates new capacity; therefore, net investment is 80.

Correct answer: B. Net investment may be low

Explanation: Gross investment includes replacement investment as well as new investment. If most of the gross amount only replaces capital lost through depreciation, little remains as an addition to the capital stock. Thus, gross investment can be high while net investment remains low. High gross investment alone does not prove rapid capital growth.

Correct answer: C. 300

Explanation: The growth component is the part of gross investment left after replacing depreciated capital. It is calculated as gross investment minus replacement investment: 1000 − 700 = 300. Therefore, net investment, or the addition to the capital stock, is 300; 700 only maintains the existing stock.

Correct answer: C. Gross investment > Depreciation

Explanation: Net investment is calculated as gross investment minus depreciation. Capital capacity increases only when net investment is positive. A positive value results when gross investment is greater than depreciation, because investment then replaces worn-out capital and adds some new capital. Equality means no net increase, while a smaller gross amount causes a decline.

Correct answer: C. Gross investment < Depreciation

Explanation: Net investment equals gross investment minus depreciation. When gross investment is less than depreciation, the result is negative net investment. Replacement investment is then insufficient to offset the capital that wears out, so the capital stock and productive capacity tend to decrease. Equality would maintain capacity rather than reduce it.

Correct answer: A. Gross investment − Net investment

Explanation: Start with the identity Gross investment = Net investment + Depreciation. To isolate depreciation, subtract net investment from both sides: Depreciation = Gross investment − Net investment. The plus sign changes sides through subtraction; multiplying or adding the two investment measures does not follow from the identity.

Correct answer: B. Net investment + Depreciation

Explanation: Begin with Net investment = Gross investment − Depreciation. Add depreciation to both sides to move it to the other side: Gross investment = Net investment + Depreciation. Gross investment is therefore always the net addition plus the amount needed to replace depreciated capital, not the net amount after another subtraction.

Correct answer: D. Gross investment = Net investment − Depreciation

Explanation: The basic identity is Gross investment = Net investment + Depreciation. Consequently, net investment is gross investment minus depreciation, and depreciation is gross investment minus net investment. Option D incorrectly subtracts depreciation from net investment to obtain gross investment; depreciation must be added when moving from net investment to gross investment.

Correct answer: B. Gross investment 300, depreciation 300

Explanation: Capital maintenance means that the capital stock is replaced but not increased. This occurs when net investment is zero, that is, when gross investment equals depreciation. In option B, 300 − 300 = 0. Options A and D show positive net investment, while C shows negative net investment and a falling capital stock.

Correct answer: B. It will fall

Explanation: Net investment equals gross investment minus depreciation. With gross investment unchanged, an increase in depreciation increases the amount deducted from it. Net investment therefore falls and may even become negative if depreciation becomes larger than gross investment. Rapid obsolescence raises the loss of productive value, so it does not support a higher net addition by itself.

Correct answer: A. Depreciation

Explanation: When new technology makes existing machines less useful or outdated, they suffer obsolescence. Obsolescence reduces the value of existing capital and is treated as a form or cause of depreciation. It does not directly identify a change in population, tax revenue, or household consumption. Thus, the relevant component in this context is depreciation.

Correct answer: C. When gross investment is less than depreciation

Explanation: A positive gross investment only shows that some investment has occurred; it does not guarantee an increase in capital. If gross investment is smaller than depreciation, the economy replaces less capital than it loses. Net investment is then negative, so the capital stock and potentially productive capacity decline despite gross investment being positive.

Correct answer: B. When replacement investment is being made

Explanation: Net investment is zero when gross investment exactly equals depreciation. In that case, investment is still taking place, but it only replaces worn-out or obsolete capital and adds no new capacity. Therefore, replacement investment can make gross investment positive while leaving net investment at zero. If depreciation were zero, positive gross investment would normally create positive net investment.

Correct answer: C. 2040

Explanation: A net measure is obtained from the corresponding gross measure by subtracting depreciation. Thus, net value = gross value − depreciation = 2400 − 360 = 2040. Adding depreciation would move in the opposite direction, while 2400 and 360 are the original gross measure and deduction rather than the required net result.

Correct answer: B. 2,400

Explanation: For measures related by depreciation, the net value equals the gross value minus depreciation: net = gross − depreciation. Rearranging gives gross = net + depreciation. Substituting the given values, gross measure = 2,040 + 360 = 2,400. Therefore, option B is correct. Subtracting depreciation would produce the wrong direction, while 2,040 and 360 are only the individual given components.

Correct answer: C. Capital will rise because net investment is 400

Explanation: Replacement investment represents the depreciation being offset. Therefore, net investment is the part of gross investment left after replacement: 900 − 500 = 400. Since this amount is positive, the economy is adding 400 to its capital stock after maintaining existing capacity. A negative or zero result would instead indicate decline or mere maintenance.

Correct answer: B. Net investment is −150 and capital is falling

Explanation: Replacement investment is treated as the amount required to offset depreciation. Net investment = gross investment − replacement investment = 450 − 600 = −150. The negative result means gross investment is insufficient to replace all depreciated capital, so the capital stock is declining by 150 in the stated units. It is not a zero or positive addition.

Correct answer: B. सकल निवेश 400, मूल्यह्रास 400

Explanation: Net investment is calculated as gross investment minus depreciation. In option B, it is 400 − 400 = 0, while gross investment is 400, which is positive. Thus all investment merely replaces the capital that has worn out; there is no net addition to the capital stock. Option A gives positive net investment, option C gives negative net investment, and option D has no positive gross investment.

Correct answer: A. सकल निवेश = शुद्ध निवेश + मूल्यह्रास से cross-check करें

Explanation: The basic identity is gross investment = net investment + depreciation. Rearranging it gives net investment = gross investment − depreciation and depreciation = gross investment − net investment. Therefore, substituting the given values back into the identity checks both arithmetic and signs. The other choices contradict the definitions: depreciation need not be zero, net investment cannot exceed gross investment when depreciation is positive, and replacement investment is still investment.