If gross investment is 160 crore rupees and depreciation is 210 crore rupees, which conclusion is correct?
Answer and explanation
Correct answer: Net investment is negative 50 crore rupees
The governing identity is net investment = gross investment − depreciation. Substituting the figures gives 160 − 210 = −50 crore rupees. Since depreciation exceeds new investment, the economy or firm experiences negative net investment and its capital stock declines by 50 crore rupees, assuming other factors are unchanged. Therefore option B is correct; A misses the negative sign, C adds the figures, and D wrongly treats unequal amounts as equal.
Frequently asked questions
What is the correct answer to this question?
Net investment is negative 50 crore rupees
Why is this the correct answer?
The governing identity is net investment = gross investment − depreciation. Substituting the figures gives 160 − 210 = −50 crore rupees. Since depreciation exceeds new investment, the economy or firm experiences negative net investment and its capital stock declines by 50 crore rupees, assuming other factors are unchanged. Therefore option B is correct; A misses the negative sign, C adds the figures, and D wrongly treats unequal amounts as equal.
Which subject and chapter does this question cover?
This is a Class 12 Economics question. Chapter: National Income and Related Aggregates. Topic: Gross investment and depreciation.
