If depreciation (consumption of fixed capital) exceeds gross investment, it can be concluded that:
A)nominal GDP is rising but real GDP is declining.
B)net investment is negative.
C)the economy is importing more than it exports.
D)the economy is expanding.

Question

Quizplus · Accepted Answer

Net investment is the difference between gross investment and depreciation. If depreciation exceeds gross investment, it means that net investment is negative. This is a sign that the economy is not investing enough in its capital stock to maintain or expand its productive capacities.

If Depreciation (Consumption of Fixed Capital) Exceeds Gross Investment, It