In an economy that has stationary production capacity,

Question

Quizplus · Accepted Answer

In an economy that has stationary production capacity, there is no increase or decrease in the capital stock. Therefore, net investment (investment minus depreciation) is zero. However, gross investment may not be zero as firms may invest in equipment or machinery to replace old ones. Nonetheless, the net effect on the capital stock is zero. GDP can still be positive as it reflects the value of production that has already taken place.

In an Economy That Has Stationary Production Capacity