If depreciation exceeds gross investment,
A) the economy's stock of capital may be either growing or shrinking.
B) the economy's stock of capital is shrinking.
C) the economy's stock of capital is growing.
D) net investment is zero.

Question

Quizplus · Accepted Answer

If depreciation exceeds gross investment, it means that the value of the economy's capital stock is decreasing. This is because the amount of capital that is being removed (through depreciation) is greater than the amount of new capital being added (through investment). Therefore, the economy's stock of capital is shrinking.

If Depreciation Exceeds Gross Investment