Asked by Akash Arora on Jun 02, 2024
Verified
Gross investment refers to
A) private investment plus public investment.
B) net investment plus replacement investment.
C) net investment after it has been "inflated" for changes in the price level.
D) net investment plus net exports.
Gross Investment
The total amount of money spent on new capital assets before accounting for depreciation.
Public Investment
Expenditure by the government on capital projects like public infrastructure, education, and health facilities that are intended to improve a country's economic capacity and well-being.
Replacement Investment
Expenditures made to replace worn-out or outdated capital goods to maintain productive capacity.
- Develop an awareness of the concepts of gross and net investment and their implications for economic prosperity.
Verified Answer
DJ
Dylan JacobJun 07, 2024
Final Answer :
B
Explanation :
Gross investment refers to the total amount of investment made in an economy, which includes net investment (i.e., investment in new capital goods) as well as replacement investment (i.e., investment made to maintain or replace existing capital goods). Therefore, option B - net investment plus replacement investment - is the correct definition of gross investment. Option A is incorrect because it includes public investment, which may or may not be a part of gross investment depending on the context. Option C is incorrect because the "inflation" of net investment is not a necessary condition for defining gross investment. Option D is incorrect because net exports have nothing to do with investment.
Learning Objectives
- Develop an awareness of the concepts of gross and net investment and their implications for economic prosperity.