Capital stock increases when
A)gross investment exceeds net investment.
B)net investment exceeds gross investment.
C)gross investment is negative.
D)net investment is positive.
E)net investment is zero.

Question

Quizplus · Accepted Answer

Capital stock increases when net investment is positive, meaning that the amount of investment in new capital goods is greater than the amount of depreciation of existing capital goods. Gross investment refers to the total amount spent on new capital goods, including replacement of old ones, while net investment subtracts the depreciation from the gross investment to get the actual increase in the capital stock. Therefore, option D is the correct answer.

Capital Stock Increases When