Which of the following causes the capital stock to increase?
A) whenever gross investment is positive
B) whenever gross investment is negative
C) when net investment is positive
D) when net investment is negative

Question

Which of the following causes the capital stock to increase?  
A) whenever gross investment is positive 
B) whenever gross investment is negative 
C) when net investment is positive 
D) when net investment is negative

Quizplus · Accepted Answer

Net investment is gross investment minus depreciation. If net investment is positive, it means that the amount of investment is greater than the amount of depreciation, which leads to an increase in the capital stock. Therefore, option C is the correct answer. Option A is incorrect because gross investment alone does not account for depreciation. Option B and D are incorrect because negative net investment means that the amount of depreciation is greater than the amount of investment, which leads to a decrease in the capital stock.

Which of the Following Causes the Capital Stock to Increase