If the economy's capital stock decreases over time,
A) net investment is positive.
B) depreciation exceeds gross investment.
C) depreciation is less than zero.
D) gross investment equals net investment.

Question

Quizplus · Accepted Answer

If the economy's capital stock decreases over time, it means that the value of capital goods has decreased due to wear and tear, obsolescence, or destruction. This decrease in value is called depreciation. Gross investment is the total amount invested in new capital goods, while net investment is gross investment minus depreciation. If the capital stock is decreasing, it means that depreciation is greater than gross investment, making net investment negative. Therefore, option B is the best choice.

If the Economy's Capital Stock Decreases Over Time