If an economy's depreciation is greater than its gross investment, then
A) net investment is positive and saving is negative.
B) the economy's capital stock decreases.
C) net investment is positive and saving is positive.
D) net investment is negative and saving is negative.
E) net investment must equal saving.

Question

Quizplus · Accepted Answer

If a country's depreciation is greater than its gross investment, it means that the country is not investing enough to replace the capital stock that is wearing out. This results in a decrease in the country's capital stock, which is the physical and human assets used to produce goods and services. Therefore, option B is the correct answer.

If an Economy's Depreciation Is Greater Than Its Gross Investment