When gross investment is positive, net investment
A) is always zero.
B) must be negative.
C) must be positive.
D) may be either positive or negative.

Question

Quizplus · Accepted Answer

When gross investment is positive, it means that there is an increase in capital stock through the production of new capital goods or the replacement of old ones. However, this does not necessarily mean that net investment is positive. Net investment takes into account the depreciation or decrease in the value of existing capital stock. If the amount of new investment is less than the amount of depreciation, net investment will be negative. If the amount of new investment is greater than the amount of depreciation, net investment will be positive. Therefore, net investment may be either positive or negative when gross investment is positive.

When Gross Investment Is Positive, Net Investment