The level of capital stock increases when investment in physical capital is:

Question

Quizplus · Accepted Answer

Capital stock is the total amount of physical capital in an economy. It increases when investment in physical capital (i.e. spending on machinery, equipment, buildings) exceeds the amount that is lost due to depreciation (i.e. wear and tear, obsolescence). Therefore, option A is the best choice as it identifies the correct condition for capital stock to increase. Option B is incorrect as it describes a situation where investment is insufficient to maintain the existing capital stock. Option C is incorrect as personal consumption is not related to capital stock. Option D is incorrect as investment in human capital (i.e. education, training) is a separate concept from physical capital stock.

The Level of Capital Stock Increases When Investment in Physical