When is change in stock added to gross investment?
Answer and explanation
Correct answer: When closing stock is greater than opening stock
Change in stock, or inventory investment, is calculated as closing stock minus opening stock. If closing stock is greater than opening stock, inventories have increased during the period, so the change is positive and is added to gross investment. If closing stock is lower, the change is negative and reduces investment; if both stocks are equal, the change is zero. Thus, option A is correct.
Frequently asked questions
What is the correct answer to this question?
When closing stock is greater than opening stock
Why is this the correct answer?
Change in stock, or inventory investment, is calculated as closing stock minus opening stock. If closing stock is greater than opening stock, inventories have increased during the period, so the change is positive and is added to gross investment. If closing stock is lower, the change is negative and reduces investment; if both stocks are equal, the change is zero. Thus, option A is correct.
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.
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