The capital stock increases whenever
A) net investment is positive.
B) gross investment is negative.
C) gross investment is exceeds net investment.
D) net investment exceeds gross investment.

Question

Quizplus · Accepted Answer

Capital stock is the total value of physical assets such as factories, office buildings, and equipment that are available in an economy at a point in time. Net investment refers to the amount by which gross investment (the amount spent on new capital goods) exceeds depreciation (the decrease in value of existing capital goods). Therefore, when net investment is positive, it means that more capital goods have been created than have been used up or retired, which leads to an increase in the capital stock.

The Capital Stock Increases Whenever