Asked by feiben alaze on Jun 08, 2024
Verified
A nation's stock of capital goods will decline when
A) gross investment exceeds net investment.
B) net investment is positive,but less than gross investment.
C) depreciation exceeds gross investment.
D) gross investment exceeds depreciation.
E) gross and net investment are equal.
Capital Goods
Long-lasting goods acquired and used by businesses to produce other goods and services, contributing to their operational capabilities.
Gross Investment
The total amount spent on purchasing or constructing new capital assets before accounting for depreciation.
Net Investment
The portion of total investments in physical assets (like buildings, machinery, and inventory) that remain after accounting for depreciation.
- Absorb the theories surrounding gross and net investment and their repercussions on the economy.
- Acquire knowledge on the notion of depreciation and its influence on net and gross investment.
Verified Answer
SH
Stacy HarrisJun 09, 2024
Final Answer :
C
Explanation :
Capital goods depreciate over time, meaning they lose value and need to be replaced. If depreciation exceeds gross investment (the amount invested in new capital goods), then the stock of capital goods will decline.
Learning Objectives
- Absorb the theories surrounding gross and net investment and their repercussions on the economy.
- Acquire knowledge on the notion of depreciation and its influence on net and gross investment.